Download This PaperBank Risk Governance
111 Pages Posted: 16 Mar 2023 Last revised: 12 Sep 2023
Date Written: September 11, 2023
Abstract
Recent regulations of risk governance call for more outsiders on bank boards. We study how these affect bank risk taking and board monitoring (CEO turnover) for 723 U.S. bank holding companies (BHC) from 2000 to 2019. Outsiders improve risk governance (decrease risk taking, increase risk monitoring) for regulatory risk measures but worsen risk governance for economic risk measures, seemingly a win-win for both. However, while regulatory risk measures appear as a useful policy tool, economic risk measures predict bank failure and so outsiders worsen risk governance. We attribute the worsening risk governance to disadvantages in information processing by outsiders.
Keywords: Risk governance, outside directors, monitoring quality, subprime crisis, risk taking, risk oversight
JEL Classification: G21, G32, G34
Suggested Citation: Suggested Citation
Peter Lawrence Swan
University of New South Wales (UNSW Sydney ( email )
School of Banking and Finance
UNSW Business School
Sydney NSW, NSW 2052
Australia
+61 2 9385 5871 (Phone)
+61 2 9385 6347 (Fax)
HOME PAGE: http://https://www.business.unsw.edu.au/our-people/peterswan
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au