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Chair-CEO generation gap and bank risk-taking

Yifan Zhou, Alper Kara and Philip Molyneux ()

The British Accounting Review, 2019, vol. 51, issue 4, 352-372

Abstract: Poor bank governance has disastrous consequences for economies as the 2007–2009 financial crisis has shown. In the aftermath, board diversity is identified as an effective mechanism to enhance bank governance. Diversity, creating cognitive conflict between board members, is expected to enhance board's independence of thought to better perform monitoring and advising functions. Age is a key demographic measure and age dissimilarity between the chair and the CEO in non-financial firms leads to better economic outcomes (Goergen, Limbach, & Scholz, 2015). In this paper, we examine whether chair-CEO age dissimilarity can mitigate banks' excessive risk-taking behaviour. Using a unique sample of 100 listed banks in Europe between 2005 and 2014, we find that age difference between the chair and the CEO reduces bank risk-taking. A chair-CEO generational gap –defined as a minimum of 20 years' age difference– has a larger impact in reducing risk-taking.

Keywords: Bank governance; Board diversity; Age difference; Generational gap; Bank risk-taking; European banks (search for similar items in EconPapers)
JEL-codes: G3 G21 G28 G39 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:bracre:v:51:y:2019:i:4:p:352-372

DOI: 10.1016/j.bar.2019.03.005

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