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Do risk governance and effective board affect bank performance? Evidence from large banks worldwide

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  • Oumeima Kacem

    (University of Sousse)

  • Sana El Harbi

    (University of Sousse)

Abstract

Worldwide, recent corporate financial scandals have raised many questions in terms of risk management and governance of banks. This study examines the impact of risk management-related corporate governance mechanisms on bank performance. Focusing on a sample of large banks, we want to assess the effect of the board of directors and risk management committee features as well as the presence of a Chief Risk Officer (CRO) in the executive board on performance over the period 2006–2017. To examine this relation properly, we employ the system-GMM (Generalized Method of Moments). Results show the importance of the risk management committee in enhancing bank performance. We also find that the presence of a CRO in the bank’s executive board decreases performance and that the lower the number of meetings, women, and independent members, the better the banks’ performance. Most importantly, results show that establishing risk governance will make banks more profitable and sustainable for the future.

Suggested Citation

  • Oumeima Kacem & Sana El Harbi, 2022. "Do risk governance and effective board affect bank performance? Evidence from large banks worldwide," Risk Management, Palgrave Macmillan, vol. 24(4), pages 461-483, December.
    • Handle: RePEc:pal:risman:v:24:y:2022:i:4:d:10.1057_s41283-022-00101-1
    DOI: 10.1057/s41283-022-00101-1
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    More about this item

    Keywords

    Risk management; Corporate governance; Board of directors; Risk governance; Bank performance;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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