Corporate Governance, Regulation and Bank Risk-Taking Behaviour in Developing Asian Countries

2015 ◽  
Author(s):  
Hiep Ngoc Luu
Keyword(s):  
Corporate Governance ◽  
Risk Taking ◽  
Bank Risk ◽  
Asian Countries

scholarly journals Corporate governance, regulation and bank risk-taking behaviour in developing Asian countries

2015 ◽  
Vol 4 (1) ◽  
pp. 201-223 ◽  
Author(s):  
Hiep Ngoc Luu
Keyword(s):  
Corporate Governance ◽  
Risk Taking ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Sufficient Evidence ◽  
Risk Level ◽  
Direct Impact ◽  
Asian Countries ◽  
Loan Loss ◽  
Level Of Risk

Using data from ten selected developing Asian countries, this paper investigated empirically the influences of corporate governance and regulations on bank risk-taking behaviour. We found sufficient evidence that corporate governance mechanism has strong effect on the level of risk taken by bank: bank with large owner(s) is associated with higher risk-taking, while board size is found to be negatively related to bank risk level, indicating that the bigger the size of the board, the less risk the bank is willing to take. Additionally, we also found that banks with more powerful CEO tend to engage in less risky activities. Meanwhile, an increase in board independence forces banks to assume more risk. Nevertheless, managerial shareholdings appear to have no direct impact on the level of risk banks undertake. Our results further showed that regulatory pressure brought about by the host-country regulators influences neither banks’ risk-taken levels nor their capital adequacy ratios. However, raising regulatory capital adequacy ratio, instead of forcing banks to reduce their risk level, does induce them to take more risk. Thus, banking regulations do not appear to be effective in developing Asian countries. Other variables, such as loan loss reserve and GDP growth also help to predict bank risk-taken pattern. Nonetheless, bank size has no direct impact on shaping the risk-taking behaviour of banks.

Factors Affecting Bank Risk-Taking: Evidence from Southeast Asian Countries

2016 ◽  
Vol 23 (2) ◽  
pp. 120-136
Author(s):  
NGUYEN THANH LIEM ◽  
TRAN HUNG SON ◽  
HOANG TRUNG NGHIA
Keyword(s):  
Risk Taking ◽  
Southeast Asian ◽  
Bank Risk ◽  
Asian Countries ◽  
Factors Affecting ◽  
Southeast Asian Countries

scholarly journals Corruption and Government Intervention on Bank Risk-Taking: Cases of Asian Countries

2018 ◽  
Vol 9 (2) ◽  
pp. 228-237
Author(s):  
Rizky Maulana Nurhidayat ◽  
Rofikoh Rokhim
Keyword(s):  
South Korea ◽  
Risk Taking ◽  
Government Intervention ◽  
The Other ◽  
Bank Risk ◽  
Asian Countries ◽  
Dummy Variables ◽  
Macroeconomic Variables ◽  
Using Data ◽  
The Impact

This paper aims to addresses the impact of corruption, anti-corruption commission, and government intervention on bank’s risk-taking using banks in Asian Countries such as  Indonesia, Malaysia, Thailand, and South of Korea during the period 1995-2016. This paper uses corruption variable, bank-specific variables, macroeconomic variables, dummy variables and interaction variable to estimate bank’s risk-taking variable. Using data from 76 banks in Indonesia, Malaysia, Thailand and South Korea over 21 years, this research finds consistent evidence that higher level of corruption and government intervention in crisis-situation will increase the risk-taking behaviour of banks. In the other hand, bank risk-taking behaviour minimized by the existence of anti-corruption commission. In addition, this paper also finds that government intervention amplifies corruption’s effect on bank’s risk-taking behaviour because of strong signs of moral hazard and weaknesses in the governance and supervision.

scholarly journals CEO power and bank risk in the UAE

2020 ◽  
Vol 15 (3) ◽  
pp. 117-128
Author(s):  
Haileslasie Tadele ◽  
Baliira Kalyebara
Keyword(s):  
Corporate Governance ◽  
Risk Taking ◽  
Global Financial Crisis ◽  
Bank Risk ◽  
Islamic Banks ◽  
Ceo Power ◽  
Governance Mechanisms ◽  
Corporate Governance Mechanisms ◽  
Conventional Banks ◽  
The Relationship

The lessons from the 2008 global financial crisis show that excessive risk taking and governance failures contribute to the failure of several banks. As a result, the relationship between corporate governance mechanisms and risk taking has been the subject of many studies. However, extant studies report inconclusive results. Therefore, this study aims to investigate the relationship between CEO power and bank risk in the UAE using data over the period of 2015–2018 and a sample of 19 UAE banks. The study uses a Pearson pairwise correlation to analyze the relationship between CEO power and bank risk. In addition, a two-tailed t-test is used to examine the differences between conventional and Islamic banks in terms of CEO power and risk-taking. The results of the study show that CEO power measured using CEO duality and CEO tenure reduces risk. Furthermore, the paper indicates that larger boards and higher CEO ownership tend to increase risk. The study also reports that conventional banks have higher return variability, larger boards and powerful CEOs than Islamic banks. However, Islamic banks tend to have higher non-performing finances than conventional banks. The study provides important insights on the relationship between CEO power and bank risk and concurs with earlier studies. The findings can be of interest to policy makers and can be used as input data for the development of corporate governance mechanisms. Shareholders can also use the survey results as input when appointing a CEO for their banks.

Corporate governance structures and bank risk taking behaviour: evidence from Africa using income bracket approach

2018 ◽  
Vol 13 (2) ◽  
pp. 138 ◽  
Author(s):  
Baah Aye Kusi ◽  
Gloria Clarissa Dzeha ◽  
Daniel Ofori Sasu ◽  
Lawrence Ansah Addo
Keyword(s):  
Corporate Governance ◽  
Risk Taking ◽  
Bank Risk ◽  
Governance Structures

Corporate governance and risk taking: the role of board gender diversity

2019 ◽  
Vol 31 (1) ◽  
pp. 19-42 ◽  
Author(s):  
Heba Abou-El-Sood
Keyword(s):  
Corporate Governance ◽  
Risk Taking ◽  
Emerging Market ◽  
Gender Diversity ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Regulatory Capital ◽  
Government Ownership ◽  
Content Type ◽  
Board Gender Diversity

Purpose This paper aims to investigate the association between board gender diversity and bank risk taking in an emerging market context. Design/methodology/approach The association between female board directorship and bank risk taking is examined, while controlling for board characteristics, managerial, concentrated, family and government ownership. Two-stage regression with instrumental variables is used for a sample of banks listed in Gulf Cooperation Council (GCC) countries during 2002-2014. Findings Results show that banks with more female board directors invest in less risky positions; the association is attenuated when the regulatory capital is larger, providing protection against risky investments, and female directors tend to invest less in risky asset positions in Islamic banks relative to conventional banks. Practical implications The relevance of the findings stems from the recent initiatives undertaken by the Basel Committee to address deficient corporate governance structures that lead to bank breakdowns and the diversified economy of the fast-growing GCC market, relying on banking services in the aftermath of the oil price drop. Originality/value This paper provides novel evidence on the influence of board gender diversity on bank risk taking in an emerging market context. This paper fills a gap in prior research by examining bank-specific regulatory capital adequacy and Islamic banking aspects.

Corporate governance and risk-taking of Islamic banks: evidence from OIC countries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ejaz Aslam ◽  
Razali Haron
Keyword(s):  
Corporate Governance ◽  
Risk Taking ◽  
Audit Committee ◽  
Liquidity Risk ◽  
Bank Risk ◽  
Board Independence ◽  
Islamic Banks ◽  
Ceo Power ◽  
Content Type ◽  
Level Of Risk

Purpose This paper aims to investigate the impact of corporate governance and other related factors on the risk-taking of Islamic banks. Risk-taking is defined according to credit risk, liquidity risk and operational risk. Design/methodology/approach The study uses the two step system generalized method of moment (2SYS-GMM) estimation technique by using a panel data set of 129 Islamic banks (IBs) from 29 countries in the Middle East, South Asia and the Southeast Asia regions covering from 2008 to 2017. Governance variables incorporated include board size, board independence, chief executive officer (CEO) power, Shariah board and audit committee, as well as other control variables. Findings This study provides evidence that board size and Shariah board are positively and significantly related to credit and liquidity risk. Board independence and CEO power are negative and significantly associated with credit and liquidity risk, but the audit committee has a mixed relationship with bank risk. Male CEOs take more risk compared to the female and more board meeting has an inverse relationship with Islamic banks risk. Bank size, however, does not influence the level of risk in Islamic banks, but leverage has an inverse relationship with bank risk. Research limitations/implications The present study sheds light on the risk-taking behaviour of the board of IBs, particularly the board independence and CEO power reducing the level of risk in IBs thereby contributing to the agency theory. Therefore, regulators and policymakers can use the findings of this study to strengthen the internal corporate governance mechanism to protect IBs at a time of financial distress. Moreover, it increases the trust of the shareholders and stakeholders in the effectiveness of governance reforms that have been pursued to reap long-term benefits. Originality/value To the best of the knowledge, this research is preliminary in examining the board behaviour on risk-taking of IBs from four different regions. The results are robust and suggest that the board of directors mitigate the level of risk in IBs.

Diversification, corporate governance, regulation and bank risk-taking

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ahmed Imran Hunjra ◽  
Mahnoor Hanif ◽  
Rashid Mehmood ◽  
Loi Viet Nguyen
Keyword(s):  
Corporate Governance ◽  
Emerging Economies ◽  
Risk Taking ◽  
Deposit Insurance ◽  
Generalized Method Of Moments ◽  
Bank Risk ◽  
Content Type ◽  
Diversification Strategies ◽  
Capital Regulations ◽  
The Impact

Purpose The purpose of this paper is to investigate the impact of diversification, corporate governance and capital regulations on bank risk-taking in Asian emerging economies. Design/methodology/approach The authors applied the generalized method of moments to analyze a sample of 116 listed banks of ten Asian emerging economies for the years 2010–2018. Findings The authors found that diversification, board size, CEO duality and board independence, block holders and capital regulations significantly affect bank risk-taking. In particular, nontraditional income sources such as noninterest income and adoption of diversification strategies minimize bank risk-taking. Practical implications It is expected that the outcomes of this study can be used by banks in Asian emerging economies that seek to reduce risk-taking by managing the diversification of their income streams and managing the impacts of capital regulation and implementing sound corporate governance features in monitoring their operations. This study suggests practical risk minimizing strategies for banks. First is the sourcing of nontraditional income and adoption of diversification strategies. Second, maintaining nonexecutive directors on the board would enhance monitoring of business activities. Third, maintaining deposit insurance would reduce bank’s risk. Government provides insurance to depositors to motivate them to deposit their funds into the banks. This, in return, facilitates banks to overcome risk. However, banks need to be cautious of any increase in capital ratio, as channeling funds into risky investments would increase risk. Originality/value This study is the first to investigate the impacts of corporate governance, diversification and regulation on bank’s risk-taking in a cross-country setting of ten Asian emerging economies.

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