The effect of corporate board attributes on bank stability

Karkowska, Renata; Acedański, Jan

doi:10.1007/s10258-019-00162-3

Cited by 40 publications

(23 citation statements)

References 79 publications

(90 reference statements)

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“…A board structure that compromises on its independence may have difficulty in effectively protecting and safeguarding the assets of shareholders. This assertion confirms earlier research by Karkowska and Acedański [9] that independent board structure decreases bank risks.…”

Section: Resultssupporting

confidence: 92%

“…We concur with this integrated framework approach and therefore propose the joint effect of board functions and activities, board structure and board monitoring to minimize bank credit risk. Finally, the work of Karkowska and Acedański [9] motivates this chapter. The authors conclude that there is no much change in the corporate governance and bank stability nexus after the financial crisis and therefore suggest the need to strengthen corporate governance practices.…”

Section: Introductionmentioning

confidence: 95%

“…The regression results confirm low risk taking behavior. Other authors use board size, board independence and board member affiliations as proxy for board structure [9]. The authors report that independent board structure reduces bank risks.…”

Section: Board Structurementioning

confidence: 99%

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Internal Controls and Credit Risk in European Banking: The Basel Committee on Banking Supervision Framework Approach

Akwaa-Sekyi¹

2020

Banking and Finance

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Poor corporate governance practices have been cited as contributory to the 2007 global financial crisis. The chapter explores a qualitative self-regulation approach to address a major risk facing banks using the Basel Committee on Banking Supervision (BCBS) framework of internal controls. The study examines the effect of the qualitative principles of the BCBS internal control framework on credit risk. Corporate institutions use internal control frameworks to address the most operational risks, but the current study hypothesizes a possible relation with the credit risk. This research covers banks from selected EU countries covering some period before and after the 2007 financial crisis using a fixed-effect model. We report a significant relationship between board functions and activities, board structure and board monitoring, and credit risk. The results indicate that investment in high-risk assets, bank profitability and board chair being ex-CEO increases credit risk in European banking. The chapter extends the scope of a previous work that used the elements of the COSO internal control framework on a single country. This quantitative measure of qualitative constructs of the framework complements existing research that uses algorithms and simulations to study credit risk.

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Section: Resultssupporting

confidence: 92%

Section: Introductionmentioning

confidence: 95%

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Internal Controls and Credit Risk in European Banking: The Basel Committee on Banking Supervision Framework Approach

Akwaa-Sekyi¹

2020

Banking and Finance

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“…Undue risktaking can put firms under distress and hence more independent boards prevent managers from indulging in actions which cause the firm to undergo considerable risk-taking. Karkowska and Acedański [2019] obtained data from 239 firms from 40 different countries to ascertain the role of board independence and risk and found a negative association between them. Chong et al [2018] investigated the data of 290 public firms listed in Malaysia from 2010 to 2014 and they reported an inverse relationship between board independence and insolvency risk as well.…”

Section: Literature Review and Hypothesis Development 21 Board Vigilmentioning

confidence: 99%

Corporate board vigilance and insolvency risk: a mediated moderation model of debt maturity and fixed collaterals

Hussain

Wen

Saad

2021

International Journal of Management and Economics

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Studies indicate that a consistent rise in insolvency risk should be addressed at the strategic level. Vigilant boards can use leverage maturity structure as a tool to control insolvency risk. However, according to the information asymmetry theory, leverage acquisition is subject to the presence of fixed assets which can be used as collateral. The current study focuses on the relationship between board vigilance and insolvency risk, mediated by debt maturity and moderated by fixed collaterals in Pakistan based non-financial firms. A data set of 284 firms is constructed between the years 2013 and 2017. Hierarchical multiple regression analysis is used to test the proposed hypothesis using ordinary least squares (OLS) and panel corrected standard errors (PCSE) regression estimators. The results indicate that debt maturity mediates the relationship between board vigilance and insolvency risk. New information is generated about the fixed collaterals, and these negatively moderate the relationship between leverage maturity and emerging market z-score indicating inefficiency in the usage of fixed assets as collaterals. These results are robust to both regression techniques confirming that the non-productive fixed collaterals overshadow the positives of tangible assets in asset structure.

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“…For instance, Masulis and Zhang, (2019) show that an independent board decreases the cost of financing for companies . Karkowska, and Acedański (2019) insist that independent members lower a firm's idiosyncratic risk and increase its ratings. Previous studies emphasize that the independence of the members of the board of directors promotes better banking governance and, therefore, stability.…”

Section: Board Independence and Financial Stabilitymentioning

confidence: 99%

Corporate Governance and Banking Stability: The Case of Universal Banks in Ghana

Li¹,

Kong²,

Sampson³

et al. 2020

IJEBA

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Purpose: Many countries both develop and developing have issues concerning corporate governance mechanisms, policy and implementations and there needs to be addressed by researchers and academics. Our study seeks to investigate whether bank stability and corporate governance variables have a robust linkage. Methodology: A country sampling of 23 commercial banks' data from 2008-2019 was used for our analysis. We employed a fixed effect estimator and generalized method of moments (GMM) estimation. Findings: Using the fixed-effect approach, we declare that board size, ages of board members, the financial experience of board members, and CEO duality have a strong positive effect on bank stability measures. We find evidence these corporate governance variables help decrease bank's risk/insolvency. Next, we found out that, percentage of female directors, audit committee activities, and directors' educational composition/qualification have reversed rather than encouraged risk in banks. For the generalized method of moments setting, we discovered that board size has a mixed effect on banks' stability. The audit committee has a negative effect on banks' stability for only the tier 1 capital. Educational qualification and directors' compensation is negatively related to the bank's credit risk measure only. The ages' of directors (average age) is strongly related to the bank's stability measures. However, the percentage of independent directors' on the board is linked to Zscore only, while the financial experience of directors and the percentage of female directors are connected to credit risk measure only while CEO duality has a great linkage with both credit risk and tier 1 capital. Practical Implications: The result indicates that banks still need to strengthen their corporate governance structures, which will help them stay strong and solvent. Originality/Value: This is crucial in understanding how governance works at the banks level and how it help in preventing financial instability.

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The effect of corporate board attributes on bank stability

Cited by 40 publications

References 79 publications

Internal Controls and Credit Risk in European Banking: The Basel Committee on Banking Supervision Framework Approach

Internal Controls and Credit Risk in European Banking: The Basel Committee on Banking Supervision Framework Approach

Corporate board vigilance and insolvency risk: a mediated moderation model of debt maturity and fixed collaterals

Corporate Governance and Banking Stability: The Case of Universal Banks in Ghana

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