Risk management, corporate governance, and bank performance in the financial crisis

Aebi, Vincent; Sabato, G.; Schmid, Markus

doi:10.1016/j.jbankfin.2011.10.020

Cited by 793 publications

(712 citation statements)

References 32 publications

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“…The studies by Sierra et al (2006), Anders and Valledado (2008), Adams and Mehran (2012), Aebi et al (2012), Francis et al (2012), Wintoki et al (2012), andPathan andFaff (2013) investigate the governance mechanism and its effect on firms' performance and value. Sierra et al (2006) suggest that a strong board can improve a bank's performance.…”

Section: Theoretical Motivation and Hypotheses Developmentmentioning

confidence: 99%

The governance, risk-taking, and performance of Islamic banks

et al. 2016

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We examine whether the difference in governance structures influences the risk taking and performance of Islamic banks compared to conventional banks. Using a sample of 52 Islamic banks and 104 conventional banks in 14 countries for the period from 2005 to 2013, we conclude that the governance structure in Islamic banks plays a crucial role in risk taking as well as financial performance that is distinct from conventional banks. Particularly, we show that the governance structure in Islamic banks allows them to take higher risks and achieve better performance because of product complexities and transaction mechanisms.However, Islamic banks maintain a higher capitalization compared to conventional banks.These results support the research on Islamic investment and risk taking. Our results add a new dimension to the governance research that could be a valuable source of knowledge for policy makers and regulators in the financial services sector.

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Section: Theoretical Motivation and Hypotheses Developmentmentioning

confidence: 99%

The governance, risk-taking, and performance of Islamic banks

et al. 2016

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“…Although the use of derivatives for hedging purposes is usually associated with a decrease in firm risk, excessive derivatives trading by insurers has nevertheless been cited as a major source of systemic risk during the financial crisis (see Cummins and Weiss, 2010). 4 crisis in 1998 is revealed to be an economically significant predictor of the performance during the financial crisis. In a related study, Aebi et al (2012) show that the performance of banks during the financial crisis was driven partially by the quality of the banks' risk governance. A similar view is shared by Diamond and Rajan (2009), who also emphasize that flaws in risk governance contributed to the poor performance of banks during the financial crisis.…”

Section: Introductionmentioning

confidence: 98%

“…Finally, Diamond and Rajan (2009) and Aebi et al (2012) emphasize that poor governance contributed to the severity of losses that banks suffered during the financial crisis. 23 We therefore use the variables Board size and Board independence to proxy for the governance of insurers before the financial crisis.…”

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confidence: 99%

Why do some insurers become systemically relevant?

Weiß

Mühlnickel

2014

Journal of Financial Stability

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Are some insurers relevant for the stability of the financial system? And if yes, what firm fundamentals and aspects of insurers' business models cause them to destabilize an entire financial sector? We find that several insurers did indeed contribute significantly to the instability of the U.S. financial sector during the recent financial crisis. We empirically confirm that insurers that were most exposed to systemic risk were larger, relied more heavily on non-policyholder liabilities and had higher ratios of investment income to net revenues on average. Contrary to current conjectures of insurance regulators, we find that the contribution of insurers to systemic risk is only driven by insurer size.

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“…Noting that financial institutions have peculiarities in terms of their high opaqueness and heavy regulation (Levine 2004;Macey and O'Hara 2003), these studies examined the effect of specific board attributes like board size, board composition, CEO duality, board activity and busyness of directors on bank performance and asset quality (Andres and Vallelado 2008;Adams and Mehran 2012;Liang et al 2013) while other studies analysed the effect of these attributes on the risk taking and risk management behaviour of banks (Erkens et al 2012;Aebi et al 2012;Faleye and Krishnan 2017).…”

Section: Introductionmentioning

confidence: 99%

“…The rationale for focusing on the first three board characteristics comes from the findings of a large literature on board governance that have found these three attributes to be important determinants of bank outcomes (see the studies by (Andres and Vallelado 2008;Adams and Mehran 2012;Erkens et al 2012;Aebi et al 2012;Liang et al 2013;Faleye and Krishnan 2017) cited earlier) while the rationale for focusing on nominee directors and CEO tenure comes the specific institutional characteristics of Indian banking (Sarkar 2004;Nachane et al 2005;Nayak 2014).…”

Section: Introductionmentioning

confidence: 99%

Bank Ownership, Board Characteristics and Performance: Evidence from Commercial Banks in India

Sarkar

2018

IJFS

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Abstract:We study the effect of board governance in state-owned and private banks by undertaking a study of commercial banks in India that has both bank groups. Covering a ten-year period from 2003 to 2012 that witnessed a large number of governance reforms in India, the results of our empirical analysis provide evidence of strong ownership effects with board independence exhibiting a significant positive correlation with the performance of private banks and a significant but negative correlation with the performance of state-owned banks. The effect of CEO duality is negative in state-owned banks where incidence of CEO duality is high. We find that a longer CEO tenure has significant positive effects on bank outcomes with these effects strengthening in the later years of CEO tenure. Our results have governance implications for strengthening the composition of board of directors and CEO tenure especially in state-owned banks.

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Risk management, corporate governance, and bank performance in the financial crisis

Cited by 793 publications

References 32 publications

The governance, risk-taking, and performance of Islamic banks

The governance, risk-taking, and performance of Islamic banks

Why do some insurers become systemically relevant?

Bank Ownership, Board Characteristics and Performance: Evidence from Commercial Banks in India

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