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Geopolitical, economic uncertainty and bank risk: Do CEO power and board strength matter?

Mohsin Shabir, Ping Jiang, Yasir Shahab and Peng Wang

International Review of Financial Analysis, 2023, vol. 87, issue C

Abstract: This study examines whether economic and geopolitical uncertainties affect bank risk. Using a sample of 574 banks from 19 countries for 2009–2020, our findings show that increasing economic and geopolitical uncertainty significantly constrain the bank risk and worsens its stability. Furthermore, we explore whether CEO power and board strength have played a moderate role in mitigating the adverse impact of economic and geopolitical uncertainty on bank risk. The finding shows that CEOs' power and strong boards improve the bank's performance and minimize the adverse effects of economic and geopolitical uncertainty on bank risk. The results are robust to alternative bank risk, economic uncertainty, and geopolitical uncertainty measures and address endogeneity. Additional analyses on bank heterogeneity show that the bank stability of listed, domestic and private-owned banks is more immune to such uncertainty.

Keywords: Geopolitical uncertainty; Economic uncertainty; Bank risk; Corporate governance; CEO power; Board strength (search for similar items in EconPapers)
JEL-codes: C33 D81 G21 G28 G32 M14 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:87:y:2023:i:c:s1057521923001199

DOI: 10.1016/j.irfa.2023.102603

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