6533b836fe1ef96bd12a0bdb

RESEARCH PRODUCT

Risk committee complexity and liquidity risk in the European banking industry

Enzo ScannellaSimona GallettaSebastiano Mazzù

subject

Organizational Behavior and Human Resource ManagementEconomics and EconometricsCorporate governanceFinancial stabilitybusiness.industrySettore SECS-P/11 - Economia Degli Intermediari FinanziariCorporate governanceRisk governanceBank liquidity riskAccountingSample (statistics)Basel IIILiquidity riskMarket liquidityBanking sector Bank liquidity risk Corporate governance Basel III Financial stabilityFinancial crisisBusinessEndogeneityBanking sectorPanel data

description

Abstract The present study aims to investigate how bank governance characteristics are related to liquidity risk by analysing board composition, gender, and the risk committee. A dynamic panel data model is employed on a sample of European banks during the period after the financial crisis (from 2011 to 2017). Furthermore, we collect information about the profiles of the directors on the boards of banks, thereby creating five categories of risk committee members. To address the endogeneity issue, a generalised method of moments two-step estimator is implemented. The findings highlight that the fundamental role of the risk committee adequately shields banks against general liquidity risks. Moreover, the results show a reduction in liquidity risk when a certain threshold of risk supervisors is defined, aiming to reduce risk-taking behaviours. We provide evidence that the effectiveness of the risk committee is strictly related to its complexity. The results of the present study support the corporate governance principles for banks established by the Basel Committee on Banking Supervision, thus reinforcing the board's risk governance responsibilities, especially with regard to the specific roles of the risk committee.

yearjournalcountryeditionlanguage
2021-12-01
10.1016/j.jebo.2021.10.033http://hdl.handle.net/10447/524838