Strong Boards, CEO Power and Bank Risk-Taking

31 Pages Posted: 2 Feb 2009 Last revised: 13 May 2009

See all articles by Shams Pathan

Shams Pathan

Curtin University; Financial Research Network (FIRN)

Date Written: February 1, 2009

Abstract

This study examines the relevance of bank board structure on bank risk-taking. Using a sample of 212 large US bank holding companies over 1997-2004 (1,534 observations), this study finds that strong bank boards (boards reflecting more of bank shareholders interest) particularly small and less restrictive boards positively affect bank risk-taking. In contrast, CEO power (CEO's ability to control board decision) negatively affects bank risk-taking. These results are consistent with the bank contracting environment and robust to several proxies for bank risk-takings and different estimation techniques.

Keywords: Bank risk-taking, Board of directors, CEO power, Bank governance, Bank holding companies

JEL Classification: G21, G28, G30, G32, G38

Suggested Citation

Pathan, Shams, Strong Boards, CEO Power and Bank Risk-Taking (February 1, 2009). Journal of Banking and Finance, Vol. 33, No. 7, pp. 1340-1350. Available at SSRN: https://ssrn.com/abstract=1336309

Shams Pathan (Contact Author)

Curtin University ( email )

Kent Street
Bentley
Perth, WA WA 6102
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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