Financial misconduct and bank risk-taking: Evidence from US banks

John Thornton, Yener Altunbaş and Yurtsev Uymaz

Journal of Banking & Finance, 2025, vol. 177, issue C

Abstract: We test for a link between bank risk-taking and regulatory enforcements against US banks for financial misconduct. Misconduct-related enforcements are associated with increased bank risk-taking on several measures of risk, and there is some evidence that the impact of enforcements on risk-taking is accentuated in the presence of powerful CEOs and a higher proportion of institutional investor ownership and mitigated when executive boards are larger, older, more independent, more gender diverse, busier, and where independent directors are relatively inexperienced. The results are robust to alternative measures of bank risk-taking, and alternative estimation techniques, including controlling for endogeneity bias.

Keywords: Bank risk-taking; Financial misconduct; CEO power; Executive boards; Institutional investors (search for similar items in EconPapers)
JEL-codes: G20 G21 G34 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:177:y:2025:i:c:s0378426625000536

DOI: 10.1016/j.jbankfin.2025.107433

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