This study examines the relevance of bank board structure on bank risk-taking. Using a sample of 212 large US bank holding companies over 1997–2004 (1534 observations), this study finds that strong ...bank boards (boards reflecting more of bank shareholders interest) particularly small and less restrictive boards positively affect bank risk-taking. In contrast, CEO power (CEO’s ability to control board decision) negatively affects bank risk-taking. These results are consistent with the bank contracting environment and robust to several proxies for bank risk-takings and different estimation techniques.
This paper analyses the influence of female directors on the demand for audit effort and on financial reporting quality for a sample of Australian non-financial listed firms over the period ...2004-2018. Our results suggest that gender diversity at the Board and the audit committee have a beneficial impact both on the demand of audit effort and on the outcomes of the audit process. This beneficial effect of female directors is attributable to non-executive directors. Long tenured and busy female directors and women chairing the board or the audit committee are revealed as especially influential at improving audit efforts and outcomes. We obtain further indication that audit effort and reporting quality improve from the first women added to the board not being necessary to attain a certain critical mass to generate these effects. Also, gender diversity improves the external auditor independence though the presence of lower of non-audit fees. The results are robust to endogeneity corrections. Evidence from the Australian market provides a positive argument for small and mid-cap Australian listed firms to follow the path of large Australian listed firms towards gender diversity.
► We find that both board size and independent directors decrease bank performance. ► Gender diversity in the boardroom improves bank performance with caveats. ► Boards are relevant for banks with ...low market power, staggered boards and for small banks.
We study whether board structure (board size, independence and gender diversity) in banks relates to performance. Using a broad panel of large US bank holding companies over the period 1997–2011, we find that both board size and independent directors decrease bank performance. Although gender diversity improves bank performance in the pre-Sarbanes-Oxley Act (SOX) period (1997–2002), the positive effect of gender diminishes in both the post-SOX (2003–2006) and the crisis periods (2007–2011). Finally, we show that board structure is particularly relevant for banks with low market power, if they are immune to the threat of external takeover and/or they are small. Our two-step system generalised method of moments estimation accounts for endogeneity concerns (simultaneity, reverse causality and unobserved heterogeneity). The findings are robust to a wide range of other sensitivity checks including alternative proxies for bank performance.
We investigate the effect of women directors on the cost of bank loans for a sample of Australian listed firms during the period 2002-2017. More women on both boards and committees are associated ...with lower loan spreads, reduced default risk, and improved financial reporting quality. The reduction in loan spread is seen from when the first female director joins the board, and the effect of that is stronger than the effects of additional (second and subsequent) women joining the board. Moreover, women’s leadership status reinforces this effect. Our results are consistent with the idea that female directors exhibit greater risk aversion than male directors, that women are not treated as tokens and are influential—even as a minority group on the board—and that they enhance corporate governance and reporting quality.
Investigamos el efecto de las mujeres consejeras en el coste de los préstamos bancarios para una muestra de empresas australianas que cotizan en bolsa durante el período 2002-2017. Un mayor número de mujeres tanto en los consejos de administración como en los comités se asocia con menores diferenciales de los préstamos, un menor riesgo de impago y una mejor calidad de los informes financieros. La reducción del diferencial de los préstamos se observa desde la primera mujer consejera, y resulta más intensa que los efectos asociados a las siguientes (segunda y siguientes) mujeres incorporadas al consejo. Además, el estatus de liderazgo de la mujer refuerza este efecto. Nuestros resultados son coherentes con las nociones de que las mujeres consejeras muestran una mayor aversión al riesgo que los hombres consejeros, que las mujeres no son tratadas como simbolo siendo influyentes incluso como grupo minoritario en el consejo y que mejoran el gobierno corporativo y la calidad de la información.
This paper examines the trends and endogenous determinants of boards of directors (board size, composition, and CEO duality) for a sample of 212 US bank holding companies, from 1997 to 2004. Overall, ...the results show that the costs and benefits of boards’ monitoring and advising roles could explain bank board structures with caveats. For example, due to the regulatory nature and comparatively intensive scrutiny of bank officers and directors, it is argued that bank managers have less control over the directors’ selection processes. Thus, bank board independence should not be the outcome of negotiation with CEOs. Consistent with this view, bank CEOs are found not to affect bank board independence. The trend analysis also provides some important results. In contrast to non-bank evidence, for instance, board size was discovered to decrease over the sample period for large and medium-sized banks, while board size remained relatively stable for small banks. These results are robust with respect to different estimation specifications. Furthermore, the study’s findings have important policy implications for bank regulators and investors.
We argue a positive association between common ownership and liquidity creation because common ownership increases risk-absorption capacity through higher profit margins, greater equity capital, and ...improved disclosure quality. Accordingly, we find solid evidence that banks with greater common ownership create 3.56%–4.54% more liquidity. The beneficial effect on liquidity creation is dominant for banks with high risk-absorption capacities, enhanced disclosure quality, low competition, greater long-term shareholdings, and low performance-sensitive managerial incentives, substantiating our theoretical conjectures and establishing five significant channels. Finally, we show that banks have incentive to create more liquidity when they have significant co-ownerships among themselves. Our main findings remain robust to multiple proxies, alternative specifications, and three methods to address endogeneity concerns – difference-in-differences based on the Blackrock–Barclays Global Investors merger in 2009, two-stage least squares analysis with instrumental variables based on Russell 2000 index inclusion, and propensity score matching.
We find that a CEO's industry tournament incentives (CITI) induce a CEO to undertake strategies that reduce the propensity of a firm to incur future stock price crash risk. CITI also has a mitigating ...effect on accounting techniques (such as, accrual manipulation, real earnings management, and financial restatement) used as channels for obfuscation and, therefore, is associated with a lower tendency to withhold bad news. CITI is more effective in reducing crash risk propensity when there is lower information quality and weaker external monitoring. Results are robust to firm governance controls, gender monitoring, and the specific personal attributes of CEOs. In short, CITI imposes on CEOs an incentive to brand themselves according to sustained visibility concepts.
•CITI captures external labour market incentives.•CITI reduces a firm's future stock price crash risk propensity.•CITI is associated with a lower tendency to withhold bad news.•CITI is more effective when there is lower information quality and weaker external monitoring.
This study examines the cost efficiency of 39 microfinance institutions across Africa, Asia and the Latin America using non-parametric data envelopment analysis. Our findings show non-governmental ...microfinance institutions particularly; under production approach, are the most efficient and this result is consistent with their fulfillment of dual objectives: alleviating poverty and simultaneously achieving financial sustainability. However, bank-microfinance institutions also outperform in the measure of efficiency under intermediation approach. This result reflects that banks are the financial intermediaries and have access to local capital market. It may be possible that bank-microfinance institutions may outperform the non-governmental microfinance institutions in the long run.
CEO Pay Gaps and Bank Risk-Taking Pathan, Shams; Haq, Mamiza; Morgan, Jacob
The European accounting review,
08/2023, Volume:
32, Issue:
4
Journal Article
Peer reviewed
Bank executives' substantial compensation is seen as one of the factors that contributed to the risk-taking that led to the 2008-2009 financial crisis. We test whether and how pay disparities between ...CEO and non-CEO executives-the so-called CEO pay gap-influences risk-taking at publicly traded commercial banks in the U.S. We find strong evidence that larger CEO pay gaps are associated with lower risk levels, improved financial performance, and greater information transparency. Our findings are unique to banks and are consistent with the CEO power proposition. We corroborate this proposition by linking larger pay gaps to increased CEO power and low CEO turnover-performance sensitivity. Our results imply that placing absolute limits on bank CEO pay would likely result in increased bank risk-taking.
