Risk Management, Corporate Governance, and Bank Performance in the Financial Crisis

Item Type Journal paper

The recent financial crisis has raised several questions with respect to the corporate governance of financial institutions. This paper investigates whether risk management-related corporate governance mechanisms, such as for example the presence of a chief risk officer (CRO) in a bank's executive board and whether the CRO reports to the CEO or directly to the board of directors, are associated with a better bank performance during the financial crisis of 2007/2008. We measure bank performance by buy-and-hold returns and ROE and we control for standard corporate governance variables such as CEO ownership, board size, and board independence. Most importantly, our results indicate that banks, in which the CRO directly reports to the board of directors and not to the CEO (or other corporate entities), exhibit significantly higher (i.e., less negative) stock returns and ROE during the crisis. In contrast, standard corporate governance variables are mostly insignificantly or even negatively related to the banks' performance during the crisis.

Authors Schmid, Markus; Aebi, Vincent & Sabato, Gabriele
Journal or Publication Title Journal of Banking and Finance
Language English
Keywords Chief risk officer, Corporate governance, Risk governance, Bank performance, Financial Crisis
Subjects business studies
Institute/School s/bf - Swiss Institute of Banking and Finance
HSG Classification contribution to scientific community
Refereed Yes
Date December 2012
Publisher Elsevier
Place of Publication Amsterdam
Volume 36
Number 12
Page Range 3213-3226
Number of Pages 14
ISSN 0378-4266
ISSN-Digital 1872-6372
Publisher DOI 10.1016/j.jbankfin.2011.10.020
Depositing User Prof. Dr. Markus Schmid
Date Deposited 21 Mar 2012 16:14
Last Modified 23 Aug 2016 11:12
URI: https://www.alexandria.unisg.ch/publications/210796


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Schmid, Markus; Aebi, Vincent & Sabato, Gabriele (2012) Risk Management, Corporate Governance, and Bank Performance in the Financial Crisis. Journal of Banking and Finance, 36 (12). 3213-3226. ISSN 0378-4266


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