Risk governance of financial institutions: The effect of ownership structure and board independence

Dupire, Marion; Slagmulder, Regine

doi:10.1016/j.frl.2018.05.001

Cited by 16 publications

(8 citation statements)

References 20 publications

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“…The importance of risk governance practices in the banking industry has been the subject of several investigations. Actually, there are different components of risk governance mechanism like, among other, requirements for having a powerful CRO (Chief Risk Officer) with overall responsibility for the bank’s risk management function (Ellul and Yerramilli, 2013; Dupire and Slagmulder, 2019), the risk appetite framework (Gontarek and Bender, 2019) and establishing a standalone board RC with experienced members (Battaglia and Gallo, 2015). However, the literature on this topic is still premature.…”

Section: Introductionmentioning

confidence: 99%

Risk governance, ethics codes and bank performance: evidence from large banks worldwide

Kacem

Harbi

2022

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PurposeThis paper has a triple objective: first, to investigate the effect of the adoption of ethics codes on bank performance, second, to analyse the role played by the risk committee (RC) effectiveness in improving bank performance and finally, to assess the indirect role that the implementation of ethics codes exerts on the latter relationship.Design/methodology/approachThe research questions are examined using an international sample of large banks worldwide from 2006 to 2017, applying the dynamic generalized method of moments (GMM) model for panel data.FindingsThe authors find that risk management committee size and independence have a positive and significant effect on bank performance. This highlights the importance of the risk governance function in enhancing bank performance. Most importantly results reveal that although larger RC tends to improve bank performance, this linkage is less strong when adopting ethical codes. They also find that the adoption of ethical codes by banks positively affects the relationship between the functioning of RC and performance.Originality/valueAlthough it is well known that risk management, business ethics and performance are interrelated, there is no research that has dealt with this question.

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Section: Introductionmentioning

confidence: 99%

Risk governance, ethics codes and bank performance: evidence from large banks worldwide

Kacem

Harbi

2022

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“…In particular, this concerns the inclusion of the CRO in the senior executive team, the remuneration of the CRO (ranked in the Top 5 paid managers), the activity carried out by the Risk committee, as well as the percentage of members of the Risk committee with professional experience in the financial sector. More recently, Dupire and Slagmulder (2019) prove that European financial institutions with powerful owners are negatively associated with CRO and Risk committee presence. While institutions with state control and higher board independence have more independent Risk committees.…”

Section: Related Literaturementioning

confidence: 99%

“…Risk Committee Experience variable measures the quality and professional experience of the members of the Risk committee in the financial sector(Aebi et al 2012;Dupire and Slagmulder 2019;Ellul and Yerramilli 2013). It is expressed by the percentage of directors who have had professional experience with companies operating in the financial sector, compared to the total of its members.…”

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confidence: 99%

Risk Governance and Performance: Evidence From Eurozone’s Large Banks

Agnese¹,

Capuano²

2020

IJFR

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In this paper, by means of econometric models, we investigate the relationship between risk governance and performance of the Eurozone’s Global Systemically Important Banks (G-SIBs), over the period 2014-2018. The results of the quantitative analysis show that the choice to appoint a Chief Risk Officer (CRO) can be useful to shrink the bank risk-taking. Furthermore, we find that the importance attributed by the bank to the CRO – in terms of membership of the board of directors and in terms of remuneration – is positively correlated to both profitability and bank risk-taking. In addition, the analysis shows that the activity carried out by the Risk committee can be helpful to break down the risks.

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“…BHCs which formally approve Risk Appetite arrangements are assigned a dummy value of one, following Gontarek and Belghitar (2018). In this study, Risk Appetite is adopted across 25% of the sample, versus 46% in Dupire and Slagmulder (2018). The mean value of the CRO Centrality variable in this study is 24.3%, versus 31.3% reported in Ellul and Yerramilli (2013).…”

Section: Descriptive Statisticsmentioning

confidence: 99%

“…Risk committees report a mean value of 69%, compared to 59.6% in Iselin (2016). Following Dupire and Slagmulder (2018), Risk Committee Charters are collected in this study (on-line) to note the adoption of a risk appetite framework. BHCs which formally approve Risk Appetite arrangements are assigned a dummy value of one, following Gontarek and Belghitar (2018).…”

Section: Descriptive Statisticsmentioning

confidence: 99%

CEO chairman controversy: evidence from the post financial crisis period

Gontarek

Belghitar

2020

Rev Quant Finan Acc

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Regulators generally discourage bank CEOs also holding the role of board Chairman, as this governance structure can hinder independent decision-making and effective risk oversight. This study examines the issue of CEO Duality, identifying a positive relation to greater risk-taking across a battery of sensitivity tests. In further analysis, the study controls for differences in supervisory monitoring levels to examine its impact. Banks led by CEO Chairmen which are subject to lower levels of supervision continue to report a robust association to risk-taking, as before. However, this association dissipates for banks which are subject to heightened supervisory monitoring. These findings indicate that agency costs related to Duality may be moderated by greater regulation. This paper weighs-in on the controversy relating to a single contentious governance structure (i.e., CEO Duality), thus informing boards, regulators and researchers of the need to consider the overall interplay of monitoring mechanisms.

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Risk governance of financial institutions: The effect of ownership structure and board independence

Cited by 16 publications

References 20 publications

Risk governance, ethics codes and bank performance: evidence from large banks worldwide

Risk governance, ethics codes and bank performance: evidence from large banks worldwide

Risk Governance and Performance: Evidence From Eurozone’s Large Banks

CEO chairman controversy: evidence from the post financial crisis period

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