Srivastav, A and Hagendorff, J (2016) Corporate Governance and Bank Risk-taking. Corporate Governance: An International Review, 24 (3). pp. 334-345. ISSN 0964-8410
Abstract
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.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2015 John Wiley & Sons Ltd. This is the peer reviewed version of the following article: Srivastav, A., and Hagendorff, J. (2016) Corporate Governance and Bank Risk-taking. Corporate Governance: An International Review, 24: 334–345. doi: 10.1111/corg.12133, which has been published in final form at http://dx.doi.org/10.1111/corg.12133. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving. |
Keywords: | Corporate Governance; Banks; Board of Directors; CEO pay; Risk Management |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > Accounting & Finance Division (LUBS) (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 03 Sep 2015 11:24 |
Last Modified: | 05 Nov 2017 01:38 |
Published Version: | http://dx.doi.org/10.1111/corg.12133 |
Status: | Published |
Publisher: | Wiley |
Identification Number: | 10.1111/corg.12133 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:89421 |