Strong Boards, CEO Power and Bank Risk-Taking
31 Pages Posted: 2 Feb 2009 Last revised: 13 May 2009
Date Written: February 1, 2009
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
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