How do board and ownership characteristics affect bank risk-taking? New evidence from sub-Saharan Africa

Adu, Douglas

Abstract

The study examines the impact of board attributes, ownership structures and other bank-specific factors on bank risk-taking. Using a sample of 220 banks in 16 sub-Saharan Africa countries for the years 2007–2018, the findings of the study are fourfold. First, the findings indicate that independent directors who are financial experts reduce bank risk-taking. Second, the study finds that the number of board meetings has a negative impact on bank risk-taking. Third, the estimation results suggest that government and foreign ownership encourage banks to take more risks. Finally, the study observes that institutional shareholder ownership influence bank risk-taking negatively. We observe that an increase in the ownership stake held by long-term institutional investors is associated with a decrease in risk-taking. Furthermore, we show that the predicted relationships vary across different periods. The findings are robust to different types of endogeneities and alternative measures of bank risk-taking. The study concludes that different corporate governance characteristics have different implications for banks' risk-taking in the region. The findings have key policy implications for banking practitioners, regulators, and policy makers in the region.

Citation

Adu, D. (2024). How do board and ownership characteristics affect bank risk-taking? New evidence from sub-Saharan Africa. Journal of Banking Regulation, 25(3), 209-233. https://doi.org/10.1057/s41261-023-00226-7

• Journal Article Type: Article
• Acceptance Date: Aug 22, 2023
• Online Publication Date: Sep 12, 2023
• Publication Date: 2024-09
• Deposit Date: Oct 24, 2024
• Publicly Available Date: Oct 24, 2024
• Journal: Journal of Banking Regulation
• Print ISSN: 1745-6452
• Electronic ISSN: 1750-2071
• Publisher: Palgrave Macmillan
• Peer Reviewed: Peer Reviewed
• Volume: 25
• Issue: 3
• Pages: 209-233
• DOI: https://doi.org/10.1057/s41261-023-00226-7
• Public URL: https://nottingham-repository.worktribe.com/output/39729753
• Publisher URL: https://research.tees.ac.uk/en/publications/how-do-board-and-ownership-characteristics-affect-bank-risk-takin