Corporate governance and bank risk-taking

• Autores: Abhishek Srivastava, Jens Hegendorff
• Localización: Corporate Governance: An International Review, ISSN-e 1467-8683, Vol. 24, Nº. 3, 2016, págs. 334-345
• Idioma: inglés
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• Dialnet Métricas: 2 Citas
• Resumen

  • Manuscript type Review Research Question/Issue Bank governance has become the focus of a flurry of recent research and heated policy debates. However, the literature presents seemingly conflicting evidence on the implications of governance for bank risk-taking. The purpose of this paper is to review prior work and propose directions for future research on the role of governance on bank stability.

    Research Findings/Insights We highlight a number of key governance devices and how these shape bank risk-taking: the effectiveness of bank boards, the structure of CEO compensation, and the risk management systems and practices employed by banks.

    Theoretical/Academic Implications Prior work primarily views bank governance as a mechanism to protect the interests of bank shareholders only. However, given that taxpayer-funded guarantees protect a substantial share of banks’ liabilities and that banks are highly leveraged, shareholder-focused governance may well subordinate the interests of other stakeholders and exacerbate risk-taking concerns in the banking industry. Our review highlights the need for internal governance mechanisms to mitigate such behavior by reflecting the needs of shareholders, creditors, and the taxpayer.

    Practitioner/Policy Implications Our review argues that the relationship between governance and risk is central from a financial stability perspective. Future research on issues highlighted in the review offer a footing for reforming bank governance to constrain potentially undesirable risk-taking by banks.