CEO Social Minds and Green Loans

Abstract

We examine the financial and real implications of bank CEOs’ social minds induced by female socialization. We find evidence of an economically sizable and statistically significant bank CEO-daughter effect in lending behaviours, controlling for borrower industry as well as bank characteristics. In specific, the “greenness” of a bank is significantly higher, when the lead bank CEO parents a first-born daughter compared to an otherwise lender. Looking at the specific lending contracts written by banks, we find that lead banks whose CEOs parent a first-born daughter provide loans with lower spread, fewer financial covenants, and less likely to require collateral, for borrowers with better CSR performance. Furthermore, we find that bank CEOs’ parenting experience with first-born daughters would predict borrowing firms’ future CSR performance positively, suggesting banks with CEOs raising a first-born daughter would promote the corporate social activities of borrowers.