The impact of board characteristics and CEO power on banks’ risk-taking: stable versus crisis periods

Catarina Fernandes (), Jorge Farinha (), Francisco Vitorino Martins () and Cesario Mateus ()
Additional contact information
Catarina Fernandes: University of Porto
Jorge Farinha: University of Porto
Francisco Vitorino Martins: University of Porto
Cesario Mateus: Aalborg Universitet

Journal of Banking Regulation, 2021, vol. 22, issue 4, No 5, 319-341

Abstract: Abstract We examine the impact of board structure, CEO power and other bank-specific factors on bank risk-taking for a sample of 72 publicly listed European banks in both stable and crisis periods. Using a simultaneous equations approach, our main findings indicate that the proportion of independent directors, the board size, and Chief Executive Officer (CEO) power affected bank risk-taking negatively during the recent financial crisis. On the contrary, institutional shareholder ownership and the presence of an ex-CEO as Chairman influenced bank risk-taking positively. Additionally, we separately analyse stable and crisis periods and observe that in the pre-crisis period only board independence and institutional ownership keep the same impact on risk while CEO power has no influence and the existence of an ex-CEO as Chairman reduces risk-taking by banks. We conclude that different governance characteristics have different relevance for banks' risk-taking contingent on the economic environment being one of stability or crisis.

Keywords: Corporate governance; Banks; Financial crisis; Risk; Simultaneous equations (search for similar items in EconPapers)
JEL-codes: G01 G21 G34 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://link.springer.com/10.1057/s41261-021-00146-4 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:jbkreg:v:22:y:2021:i:4:d:10.1057_s41261-021-00146-4

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/41261/PS2

DOI: 10.1057/s41261-021-00146-4

Access Statistics for this article

Journal of Banking Regulation is currently edited by Dalvinder Singh

More articles in Journal of Banking Regulation from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().