Did you read a headline today that women bankers are more prone to risk-taking than men, despite the myth that they are more risk-averse? Did you feel that some journalists even implied under-qualified women propelled onto bank boards should take part of the blame for the financial crisis? I can’t blame you, because this is how the press reported a Bundesbank discussion paper on “Executive board composition and bank risk taking”.
I read this story in the Guardian, the Financial Times and in Here is the City. I was surprised that the wording of their articles was almost identical, as I thought their journalists are supposed to be paid for independent research and editing, not just for copy pasting press releases. Being a “woman banker” myself, I was of course skeptical of this reported “study” and decided to have a look at the actual discussion paper, authored by – surprise surprise – three male researchers who investigated how board room composition in terms of gender, age, experience and educational background was linked to risk-taking.
Let’s look at what the press reported and what the so-called “study” actually found. My favourite is the Guardian article by Philipp Inman. The headline reads: “Women executives in banks prone to more risk taking, says study. Study for the German central bank claims the presence of women in senior roles was a contributing factor to the crisis.” Wow, that’s serious stuff! But what is the first sentence of the actual article?
“Women at the top of the banking industry spur their male colleagues to take bigger risks, according to a study that undermines the widely held view of the calming influence female staff have on testosterone driven company boards.”
That is not really what the headline said, is it? So women should not be on boards, because their presence alters the male board members’ behaviour negatively? The solution, of course, is to remove women from boards.
Interestingly, I found no such strong words in the actual study, which is somewhat more vague and reasonable. Here is what Philipp Inman could have found in the actual study, if he had bothered to read it, instead of copy pasting a press release:
“However, in the three years following the increase in female board representation, risk taking increases although the change is economically marginal. Our exploration of the underlying mechanism suggests that this result is mainly attributable to the fact that female executives have less experience than their male counterparts.”
First of all, the paper says that the changes in risk taking are ECONOMICALLY MARGINAL. But that seems to be enough for a Financial Times headline to report that women bankers have caused the financial crisis! Not only that, but they go on to note that this may be attributable to a lack of experience – but check the wording! Interestingly, the authors do not say that the female executives IN THEIR DATA SET happened to have less experience, but claim that female executives as a rule have less experience than their male counterparts, which is curious!
If you read the “study” further, you find that risk taking decreases with more PhDs and more years of experience represented. As the women in the data set happened to be younger on average and to hold less PhDs, the authors clearly could have separated out these factors to see if women board members lead to more risk taking all else equal, but either they didn’t, which calls the validity of their analysis into question, or they did (which is hinted at in their reference to “female executives having less experience”) but decided not to go into it as it would call into question the whole point of the discussion paper – to argue against women bankers on executive boards.
Given the rather modest claims of the Bundesbank discussion paper, I do wonder how this story made such sensational headlines across the financial press this morning. Who placed it there? It is another case in point for why we need bloggers and independent journalists, because many established journalists we do have do not seem to be taking their duties seriously anymore!