Geopolitical, economic uncertainty and bank risk: do CEO power and board strength matter?
Geopolitical, economic uncertainty and bank risk: do CEO power and board strength matter?
This study examines whether economic and geopolitical uncertainties affect bank risk. Using a sample of 574 banks from 19 countries for 2009–2020, our findings show that increasing economic and geopolitical uncertainty significantly constrain the bank risk and worsens its stability. Furthermore, we explore whether CEO power and board strength have played a moderate role in mitigating the adverse impact of economic and geopolitical uncertainty on bank risk. The finding shows that CEOs' power and strong boards improve the bank's performance and minimize the adverse effects of economic and geopolitical uncertainty on bank risk. The results are robust to alternative bank risk, economic uncertainty, and geopolitical uncertainty measures and address endogeneity. Additional analyses on bank heterogeneity show that the bank stability of listed, domestic and private-owned banks is more immune to such uncertainty.
Bank risk, Board strength, CEO power, Corporate governance, Economic uncertainty, Geopolitical uncertainty
Shabir, Mohsin
7ba9b443-440d-410a-a120-bca3a91d7edf
Jiang, Ping
8bb817be-6407-49e1-9039-efb1a8b7948b
Shahab, Yasir
4b7e7f68-ab37-4182-acf2-c80ca3ea29db
Wang, Peng
9496fb0a-1c17-4b6b-a755-aedf19bb83e5
1 May 2023
Shabir, Mohsin
7ba9b443-440d-410a-a120-bca3a91d7edf
Jiang, Ping
8bb817be-6407-49e1-9039-efb1a8b7948b
Shahab, Yasir
4b7e7f68-ab37-4182-acf2-c80ca3ea29db
Wang, Peng
9496fb0a-1c17-4b6b-a755-aedf19bb83e5
Shabir, Mohsin, Jiang, Ping, Shahab, Yasir and Wang, Peng
(2023)
Geopolitical, economic uncertainty and bank risk: do CEO power and board strength matter?
International Review of Financial Analysis, 87, [102603].
(doi:10.1016/j.irfa.2023.102603).
Abstract
This study examines whether economic and geopolitical uncertainties affect bank risk. Using a sample of 574 banks from 19 countries for 2009–2020, our findings show that increasing economic and geopolitical uncertainty significantly constrain the bank risk and worsens its stability. Furthermore, we explore whether CEO power and board strength have played a moderate role in mitigating the adverse impact of economic and geopolitical uncertainty on bank risk. The finding shows that CEOs' power and strong boards improve the bank's performance and minimize the adverse effects of economic and geopolitical uncertainty on bank risk. The results are robust to alternative bank risk, economic uncertainty, and geopolitical uncertainty measures and address endogeneity. Additional analyses on bank heterogeneity show that the bank stability of listed, domestic and private-owned banks is more immune to such uncertainty.
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Accepted/In Press date: 20 February 2023
e-pub ahead of print date: 24 February 2023
Published date: 1 May 2023
Additional Information:
Funding Information:
Ping Jiang acknowledges the financial support from the National Natural Science Foundation of China (Grant number 72073024 ) and “the Fundamental Research Funds for the Central Universities ” in University of International Business and Economics (UIBE) ( CXTD12-03 ). Yasir Shahab acknowledges the financial support from the “ National Natural Science Foundation of China ” for “ Research Fund for International Young Scientists ”, Grant Number: 72150410446 and “ Funds for High-Level Talents of Xijing University (2019) ”, Grant Number: XJ19B02 .
Publisher Copyright:
© 2023 Elsevier Inc.
Keywords:
Bank risk, Board strength, CEO power, Corporate governance, Economic uncertainty, Geopolitical uncertainty
Identifiers
Local EPrints ID: 476080
URI: http://eprints.soton.ac.uk/id/eprint/476080
ISSN: 1057-5219
PURE UUID: 43252c5d-95e5-4f88-9c91-eed10c684fc5
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Date deposited: 12 Apr 2023 11:39
Last modified: 17 Mar 2024 03:37
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Author:
Mohsin Shabir
Author:
Ping Jiang
Author:
Yasir Shahab
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