The Determinants and Outcomes of Bank Risk Governance after the Crisis: An International Study

47 Pages Posted: 10 Feb 2016

See all articles by Shane Magee

Shane Magee

Macquarie University, Macquarie Business School

Sue Wright

University of Newcastle; UTS Business School; Financial Research Network (FIRN)

Meeline Li

Macquarie University, Macquarie Business School

Date Written: October 8, 2015

Abstract

This paper extends Ellul and Yerramilli’s (2013) risk governance index for U.S. banks to international banks across 33 countries, using that index to examine relations between national codes of governance, individual bank risk governance and both risk and performance outcome measures in periods before, during and after the financial crisis. We focus on the post-crisis experience, and whether banks have learned from that event. During the crisis, it appears that banks were locked into positions regarding risk that were determined by their prior risk governance policies. This had several consequences: risk-taking during the crisis was related to prior risk, and prior risk governance, and better governed banks experienced poor performance, particularly during the crisis. However, since the crisis period, risk governance policies have been less influential, and we find no relation between prior risk governance and risk, which supports the argument that banks have not learned lessons from the financial crisis. The importance of both taking risk and managing those risks well is highlighted by significance of the interaction term between risk and risk governance during the crisis and over the whole period of the study. These results will be useful for bank regulators and bank managers.

Keywords: Risk governance, international banks, performance, risk, post-crisis period

JEL Classification: G21, G32, G34, G38

Suggested Citation

Magee, Shane and Wright, Sue and Li, Meeline, The Determinants and Outcomes of Bank Risk Governance after the Crisis: An International Study (October 8, 2015). CIFR Paper No. 090/2016. Available at SSRN: https://ssrn.com/abstract=2729587 or http://dx.doi.org/10.2139/ssrn.2729587

Shane Magee

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Sue Wright (Contact Author)

University of Newcastle ( email )

University Drive
Callaghan, NSW 2308
Australia

UTS Business School ( email )

Sydney
Australia

Financial Research Network (FIRN) ( email )

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

Meeline Li

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
163
Abstract Views
727
rank
195,707
PlumX Metrics