Risk Governance and Performance of the Italian Banks: An Empirical Analysis

Abstract

The paper investigates the relation between the adoption of good practices in risk management and the level of performance and riskiness of banks. In particular, we aim at understanding if the application of the Enterprise Risk Management approach to banks helps increasing their stability. We test the hypothesis that those banks using an integrated risk management approach have, ceteris paribus, a lower level of risk and a higher performance. Our analysis focuses on 21 Italian listed banking groups, in the time period 2005-2013. Our preliminary results show that the risk management function influences the risk and performance of the bank; however, it is not possible from our data to define an optimal model of risk governance.

Keywords: risk management, risk governance, enterprise risk management, banking system

JEL Classification: G21, G34, G39