Independence in bank governance structure: Empirical evidence of effects on bank risk and performance

Harkin, Seán; Mare, Davide Salvatore; Crook, Jonathan

doi:10.1016/j.ribaf.2019.101177

Cited by 24 publications

(24 citation statements)

References 38 publications

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“…Following the prior studies, credit risk is measured by NPL (Lu and Boateng, 2018; Harkin et al , 2020) while CAP is measured by the ratio of capital funds to total assets. NFLC, CAP and NPL represent the three endogenous variables in the following SEM.…”

Section: Methodsmentioning

confidence: 99%

The inter-relationships among liquidity creation, bank capital and credit risk: evidence from emerging Asia–Pacific economies

Le¹,

Pham

2021

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PurposeThis study investigates the inter-relationships among liquidity creation, bank capital and credit risk in selected emerging economies between 2012 and 2016.Design/methodology/approachA three-step procedure as proposed by Berger and Bouwman (2009) is used to measure liquidity creation. Thereafter, a simultaneous equations model with the generalized method of moments (GMM) estimator is used to examine the links between liquidity creation, bank capital and credit risk.FindingsThe findings indicate that bank capital and credit risk affect each other positively after controlling for liquidity creation. Also, the findings show a negative impact of credit risk on liquidity creation while our findings do not find any evidence to confirm the reverse relationship between them. Furthermore, the findings demonstrate a two-way negative relationship between liquidity creation and bank capital in these emerging economies. Finally, the results indicate a positive relationship between capital and credit risk, especially in the case of small banks in the sample.Practical implicationsThe findings suggest that the trade-off between the benefits of financial stability induced by tightening capital requirements and those of improved liquidity creation has crucial implications for policymakers and bank regulators in making the banking system more resilient. A positive impact of capital on credit risk emphasizes that the authorities in selected emerging economies should put more attention on small banks to ensure their exposures under target control.Originality/valueThis is the first study that examines the dynamic interrelationships among liquidity creation, bank capital and credit risk in the Asia–Pacific region.

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Section: Methodsmentioning

confidence: 99%

The inter-relationships among liquidity creation, bank capital and credit risk: evidence from emerging Asia–Pacific economies

Le¹,

Pham

2021

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“…There are several studies about the impact of corporate governance quality on financial performance in the banking sector (Anginer et al, 2018;Aslam and Haron, 2020;Buallay, 2019b;Dalwai et al, 2015;Esteban-Sanchez et al, 2017;Ghosh, 2017;Harkin et al, 2020;Maxfield et al, 2018;Nawaz, 2017;Nobanee and Ellili, 2022;Peni and Va ¨ha ¨maa, 2012;Shakil et al, 2019). In this regard, some studies demonstrated that effective corporate governance increases financial performance and reduces agency problems (Esteban-Sanchez et al, 2017;Miras-Rodrı ´guez et al, 2015;Orazalin and Mahmood, 2019;Soana, 2011).…”

Section: Corporate Governance and Bank Performancementioning

confidence: 99%

ESG dimensions and bank performance: an empirical investigation in Italy

Menicucci

Paolucci

2022

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Purpose This study aims to investigate the impact of environmental performance, social responsibility and corporate governance (ESG) on bank performance (BP) in the Italian banking sector. It analyzes the relationships between 10 dimensions of ESG pillars and BP indicators during the period 2016–2020. Design/methodology/approach This study examines a sample of 105 Italian banks and develops three econometric models to verify the effect of ESG initiatives on BP indicators. The independent variables are the ESG dimensions collected from the Refinitiv database, whereas the explanatory variables are performance indicators measured through accounting and market variables. Findings The findings show that ESG policies negatively affect operational and market performance in the banking sector, suggesting that Italian banks have not fully embraced strong sustainability procedures. However, the relationships between ESG dimensions are mixed if measured individually. The results show a significant positive impact of emission and waste reductions on financial and operating performance, but regarding social aspects, it is proved that better product responsibility decreases accounting performance. Research limitations/implications This study offers an in-depth examination of ESG practices in relation to current and future performance. In particular, the findings provide practitioners and academics with an actual set of predictors in the ESG area to improve BP. Originality/value To the best of the authors’ knowledge, this is the only study that has investigated the impact of ESG issues on BP in Italy. Few prior studies have used all dimensions of ESG policies at a disaggregated level to investigate their effect on various performance indicators.

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“…They attribute their results to the important role of board effectiveness in reducing agency cost through the separation of ownership from control and an overall reduction in the firms' cost of capital. Harkin et al (2020) use a simultaneous equation technique using data from UK banks spanning from 2003 to 2012 and find that the oversight function provided by nonexecutive directors lowers the probability of bank failure and empowering independent chair lowers firm risk and increases returns. Datta et al (2020) use a sample of 250 large transactions in the manufacturing sector undertaken by US firms in 33 countries between 1991 and 2006, to examine the role of board characteristics on the performance of crossborder mergers and acquisitions.…”

Section: Review Of Related Literaturementioning

confidence: 99%

“…Most literature focus on the Anglo-Saxon economies, with limited studies on developing economies (Khan and Vieito, 2013;Farag and Mallin, 2017). Studies on developing economies focus on Bangladesh (Rashid, 2018), China (Liu et al, 2015;Liao et al, 2019), Israel (Chen and Gravious, 2016), Turkey (Ciftcia et al, 2019), India (Chauhan and Dey, 2017) and Japan (Morikawa, 2020) and a very few of these studies focus on banks (Harkin et al, 2020).…”

Section: Introductionmentioning

confidence: 99%

Independent board, gender diversity and bank performance in Nigeria: a system-GMM approach

Okoyeuzu

Ujunwa²,

Ujunwa

et al. 2021

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Purpose This study aims to examine the effects of board independence and gender diversity on bank performance in Nigeria. Design/methodology/approach The two-step system-generalized method moment was used to estimate the effect of board independence and gender diversity on bank performance in Nigeria using annual data of 15 deposit money banks from 2006 to 2018. Findings The results revealed that gender diversity is a significant positive predictor of bank performance, whereas board independence is a negative predictor of bank performance in Nigeria. Practical implications Despite the significant positive relationship between gender diversity and bank performance, this paper does not recommend mandatory quota-based initiates of female representation on corporate boards because of the increasing number of female representations on corporate boards of banks in Nigeria. Originality/value The study contributes to corporate governance literature from developing country perspective and policy, particularly, on the relevance or otherwise of market-based measures in assessing bank performance in developing counties. This paper finds that market-based variables are not good measures of firm performance in economies with underdeveloped markets.

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Independence in bank governance structure: Empirical evidence of effects on bank risk and performance

Cited by 24 publications

References 38 publications

The inter-relationships among liquidity creation, bank capital and credit risk: evidence from emerging Asia–Pacific economies

The inter-relationships among liquidity creation, bank capital and credit risk: evidence from emerging Asia–Pacific economies

ESG dimensions and bank performance: an empirical investigation in Italy

Independent board, gender diversity and bank performance in Nigeria: a system-GMM approach

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