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Board composition, monitoring and credit risk: evidence from the UK banking industry

Jia Lu and Agyenim Boateng ()
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Jia Lu: Liverpool Hope University
Agyenim Boateng: Glasgow Caledonian University

Review of Quantitative Finance and Accounting, 2018, vol. 51, issue 4, 1107-1128

Abstract: Abstract This paper examines the effects of board composition and monitoring on the credit risk in the UK banking sector. The study finds CEO duality, pay and board independence to have a positive and significant effect on credit risk of the UK banks. However, board size and women on board have a negative and significant influence on credit risk. Further analysis using sub-samples divided into pre-financial crisis, during the financial crisis and post crisis reinforce the robustness of our findings. Overall, the paper sheds light on the effectiveness of the within-firm monitoring arrangement, particularly, the effects of CEO power and board independence on credit risk decisions thereby contributing to the agency theory.

Keywords: Corporate governance; Board composition; Monitoring; Credit risk; Banks (search for similar items in EconPapers)
JEL-codes: G3 G21 G32 (search for similar items in EconPapers)
Date: 2018
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