Better Safe than Sorry. Will New Rules on Bank Corporate Governance Prevent Excessive Risk Taking?

52 Pages Posted: 14 Aug 2018

See all articles by Marina Brogi

Marina Brogi

University of Rome I - Dipartimento Banche Assicurazioni Mercati

Valentina Lagasio

Sapienza University

Date Written: April 18, 2018

Abstract

Conventional wisdom leads to assert that good governance may underpin bank performance while bad governance destroys stability and soundness. Using the banks in the Eurostoxx index, we run a factor analysis that enables us to synthesize 23 bank board characteristics into seven key features: independence, size, dedication, tenure, corporate governance quality, external perspective, competence and diversity. We then use a multiple regression and find that indeed Corporate Governance curbs risk taking - measured by Z-Score - by banks in our sample. Our findings try to assess which governance variables are most relevant for regulators in containing bank risk taking.

Keywords: Corporate Governance, Banks, Regulation, Banking Union, Risk taking

JEL Classification: E52, E58, G14, G21

Suggested Citation

Brogi, Marina and Lagasio, Valentina, Better Safe than Sorry. Will New Rules on Bank Corporate Governance Prevent Excessive Risk Taking? (April 18, 2018). Available at SSRN: https://ssrn.com/abstract=3215820 or http://dx.doi.org/10.2139/ssrn.3215820

Marina Brogi

University of Rome I - Dipartimento Banche Assicurazioni Mercati ( email )

Rome
Italy

Valentina Lagasio (Contact Author)

Sapienza University ( email )

Via del Castro Laurenziano, 9
Rome, 00185
Italy

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