Mediating Risk Taking on Relationship between Board Structure Determinants and Banks Financial Performance

Abstract

This study examines the relevance of bank board structure determinants (board independence, board size and concentrated ownership) on financial performance and level risk taking. In addition, the role of risk taking investigated as mediator variable on relationship between these variables and financial performance. This research contributes to the empirical research, Using a sample of 37 Malaysian Islamic and conventional banks over [2005][2006][2007][2008][2009][2010][2011][2012][2013][2014]. In This study, The relationship between board structure determinants with level of risk taking and financial performance tested by pooled ordinary least square (OLS), fixed effects model, and generalized method of moments (GMM), however the role of risk taking as mediator variable examined by Baron and Kenny approach and Sobel test. The results shows that board structure have positive and negative relationship with financial performance and level of risk taking respectively. Furthermore, the relationship between board independence and concentrated ownership with financial performance mediate by risk taking.

Corporate Governance and Firm Risk: Evidence from Malaysian Shariah Compliance Companies

“…The result indicates that when firms have a majority of independent board, the less risky the firms are. This finding such consistent with (Cheng et al, 2016;Minton et al, 2012;Ni & Purda, 2012;Nodeh et al, 2015). However, there result contradict from previous literatures with McNulty et al (2012) and Shirouyehzad, Hosseinzadeh Lotfi, and Dabestani (2014) where higher proportion of non-executive directors are not initiate to have any major effect on corporate risk.…”

“…The result is in line with Minton et al (2012), Cheng et al (2016), Ni and Purda (2012) and Nodeh et al (2015) which suggested that more independent directors would enhance consistent and transparent decision making as well as reduce the risk of the firm.…”

“…Ashbaugh-Skaife, Collins, Kinney, and Lafond (2009) show a negative relationship between board independence and unsystematic risk, beta and cost of equity. The result is consistent with Nodeh, Anuar, Ramakrishnan, Rafatnia, and Nodeh (2015) whereby in their study they have investigated the relationship between board independence, board size and concentrated ownership as board structure determinants with level of risk taking by using ordinary least square (OLS). The result illustrates a negative relationship between board independence and firm's risk.…”

“…Wang and Oliver (2009) in their study also came up with a same result when they concluded that there is no significant influence between board independent with performance risk. Therefore, the study made by Ashbaugh-Skaife et al (2009) and Nodeh et al (2015) also show a negative relationship between board independence and unsystematic risk, beta, cost of equity and risk taking.…”

Encouraging SMEs performance through entrepreneurial intentions, competencies, and leadership: serial mediation model

“…SMEs performance 2.2.4 Entrepreneurial resilience and risk-taking propensity as mediation roles. Nodeh et al (2015) revealed that a positive association between financial performance and board structure variables was partially mediated by RTP. On the other hand, Khan et al (2022) explored how ER partially mediated the emotional intelligence and SME performance linkage.…”