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

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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.

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Notes

  1. We exclude banks in which the risk management committee is merged with another one like for example the audit committee.

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Authors and Affiliations

  1. Laboratory of Research for Economy, Management and Quantitative Finance, Institute of High Commercial Studies, University of Sousse, Sousse, Tunisia

    Oumeima Kacem & Sana El Harbi

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  1. Oumeima Kacem
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  2. Sana El Harbi
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Correspondence to Oumeima Kacem.

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Appendix A List of banks in our sample

Appendix A List of banks in our sample

No

Bank name

Country

No

Bank name

Country

1

Industrial & Commercial Bank of China

China

14

BNP Paribas

France

2

China Construction Bank Corporation

China

15

Deutsche Bank

Germany

3

Bank of China

China

16

Commerzbank

Germany

4

Bank of Communications

China

17

BBVA

Spain

5

Agricultural Bank of China

China

18

Banco Santander

Spain

6

China Merchants Bank

China

19

UBS Group AG

Switzerland

7

China CITIC Bank Corp

China

20

Crédit Suisse Group

Switzerland

8

Commonwealth Bank of Australia

Australia

21

HSBC Holdings

UK

9

Australia & New Zealand Banking Group

Australia

22

Barclays Plc

UK

10

National Australia Bank

Australia

23

Royal Bank of Scotland group

UK

11

Westpac Banking Corp

Australia

24

Lloyds banking group

UK

12

Wells Fargo

USA

25

Bank Of Montreal

Canada

13

JPMorgan Chase and Co

USA

26

Toronto-Dominion Bank

Canada

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Kacem, O., Harbi, S.E. Do risk governance and effective board affect bank performance? Evidence from large banks worldwide. Risk Manag 24, 461–483 (2022). https://doi.org/10.1057/s41283-022-00101-1

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