How do board and ownership characteristics affect bank risk-taking? New evidence from sub-Saharan Africa

Douglas A. Adu ()
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Douglas A. Adu: Teesside University

Journal of Banking Regulation, 2024, vol. 25, issue 3, No 1, 209-233

Abstract: Abstract The study examines the impact of board attributes, ownership structures and other bank-specific factors on bank risk-taking. Using a sample of 220 banks in 16 sub-Saharan Africa countries for the years 2007–2018, the findings of the study are fourfold. First, the findings indicate that independent directors who are financial experts reduce bank risk-taking. Second, the study finds that the number of board meetings has a negative impact on bank risk-taking. Third, the estimation results suggest that government and foreign ownership encourage banks to take more risks. Finally, the study observes that institutional shareholder ownership influence bank risk-taking negatively. We observe that an increase in the ownership stake held by long-term institutional investors is associated with a decrease in risk-taking. Furthermore, we show that the predicted relationships vary across different periods. The findings are robust to different types of endogeneities and alternative measures of bank risk-taking. The study concludes that different corporate governance characteristics have different implications for banks' risk-taking in the region. The findings have key policy implications for banking practitioners, regulators, and policy makers in the region.

Keywords: Corporate governance; Risk-taking; Banking crisis; Governance reforms (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1057/s41261-023-00226-7

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