Does Board Diversity Matter in Credit Risk?

Arango, Daniel Giraldo; Gaitán, Sandra

doi:10.1177/09721509211026822

Cited by 5 publications

(5 citation statements)

References 38 publications

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“…Many studies have been devoted to examining the determinants of bank risk from different angles. For example, several studies have investigated whether bank risk is affected by corporate governance mechanisms such as board diversity (Arango and Gaitan, 2021; Abou-El-Sood, 2021; Kinateder et al , 2021). Some studies have looked at the impact of bank strategies such as geographic diversification (Le et al , 2020; Le et al , 2019) and income diversification (Lee et al , 2020) or foreign ownership (Lee and Hsieh, 2014; Le, 2021).…”

Section: Brief Overview Of the Literaturementioning

confidence: 99%

The interrelationships between bank risk and market discipline in Southeast Asia

Nguyen

Le²

2022

SEF

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Purpose The purpose of this study is to examine whether a bidirectional relationship between bank risk and market discipline may exist in Southeast Asia. Design/methodology/approach A simultaneous equations model with a three-stage least squares estimator is used to examine the interrelationships between bank risk and market discipline using a sample of 79 listed banks in five countries in Southeast Asia (ASEAN-5) from 2006 to 2019. Findings The findings show a two-way relationship between bank risk and market discipline. In particular, market discipline has a negative impact on bank risk, while there is a positive relationship between bank risk and market discipline. A bidirectional relationship between them still holds when using an alternative measure of bank risk in subsamples, controlling for the global financial crisis and governance indicators. Practical implications The findings indicate that market discipline can reduce bank risk. Meanwhile, a positive impact of bank risk on market discipline reemphasizes that market discipline is a powerful tool to ensure banks do not have excessive risk-taking. Nonetheless, the findings suggest that further implementation of market discipline as the third pillar of the Basel framework is necessary for the banking systems in ASEAN-5. Originality/value To the best of the authors’ knowledge, this study is the first attempt to investigate the interrelationship between bank risk and market discipline in Southeast Asia.

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Section: Brief Overview Of the Literaturementioning

confidence: 99%

The interrelationships between bank risk and market discipline in Southeast Asia

Nguyen

Le²

2022

SEF

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“…In addition, the violation of breaking the risk limit occurs due to a lack of firmness by the BOD in limiting credit granting that has exceeded the limit. Arango and Gaitan (2021) stated that the diversity of the BOD plays an important role in reducing credit risk, not only in terms of gender, but also in the balance between expertise, experience, and the BOD understanding of the business, so the BOD decision-making contributes to bank success. Many uncertified risk management employees also contribute to weak credit risk identification and management processes.…”

Section: Discussionmentioning

confidence: 99%

Implementation of credit risk management basel principles (Evaluation Study of an Indonesian Commercial Bank)

Sutono,

Hermawan

2024

Owner

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The study evaluated the implementation of credit risk management at Bank PQR based on the Basel Principles regarding Management of Credit Risk due to increasing Low-Quality Credit in the last six months. It adopted a case study approach at Bank PQR, one of Indonesia's commercial banks, in the Corporate Segment with total credit reaching 62% of the Bank PQR credit portfolio using a qualitative descriptive method by conducting document analysis and interviews to collect data. The study sample consists of 30 credit-granting proposals of Bank PQR. First, it evaluated the suitability of the Basel Principles with the regulation of the Financial Services Authority, then analyze Bank PQR document, conduct an interview and last evaluated implementation of credit risk management by providing a score of three if suitable and implemented well, two if suitable and not implemented well and one if not suitable. The result shows the implementation is not by the Basel Principles with a final score of 2.58 out of 3, and the main weakness being the inadequacy of the credit risk environment’s development. It recommends the Bank PQR to improve its credit risk environment, such as compliance with regulations, employee training, and implementing good internal controls.

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“…The panel data method has been used by other relevant studies [16,22,24,26,47,55,[68][69][70]. Although other authors have preferred to use cross-sectional studies [14,27], using a panel data analysis is useful because it expands the number of observations available to the model.…”

Section: Methodsmentioning

confidence: 99%

Relationship between Women on Board Directors and Economic Value Added: Evidence from Latin American Companies

Arango-Home,

González-Ruiz,

Valencia-Arias

2023

Sustainability

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This study aims to evaluate the relationship between the presence of women on boards of directors and the generation of economic value added (EVA®). For the empirical analysis, a panel data model with random effects is used, encompassing 202 Latin American companies between 2019 and 2021. The results obtained show that having women on boards of directors has a non-significant positive effect on EVA®, which diminishes as women’s participation on the board increases. Theory suggests that more diverse boards of directors exercise better control, leading to improved financial results. However, the diversity of members has also been associated with longer decision-making processes that generate inefficiencies and increase costs. This contribution adds to the existing literature by exploring under-studied variables in the region and expanding knowledge on this topic in the Latin American context.

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Does Board Diversity Matter in Credit Risk?

Cited by 5 publications

References 38 publications

The interrelationships between bank risk and market discipline in Southeast Asia

The interrelationships between bank risk and market discipline in Southeast Asia

Implementation of credit risk management basel principles (Evaluation Study of an Indonesian Commercial Bank)

Relationship between Women on Board Directors and Economic Value Added: Evidence from Latin American Companies

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