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To What Extent does CEO Behavior Enhance Risk-Taking? A Banking Sector Related Evidence

Author

Listed:
  • Wafa Jilani

    (None)

  • Jamel Chouaibi

    (None)

  • Mihaela Onofrei
  • Bogdan-Narcis Firtescu
  • Paula-Andreea Terinte

Abstract

The present paper is designed to examine the extent of the Chief Executive Officer’s (CEO) behavioral impact on the bank risk-taking venture. The sample involves a set of 540 banks, observed over a longitudinal panel data set (2007-2019). A multiple linear-regression technique has been applied. The attained results prove to highlight that when CEOs seem to enjoy a great deal of overconfidence, they are more likely to influence the board’s decision-making to their proper risk-reducing advantage. The greater the CEO dominance is, the more decreased the bank specific risk turns out to be, given the significantly positive association of CEO dominance with the risk-taking procedure. This paper's results have implication for banks and policymakers looking to promote risk-taking. This paper could be useful to shareholders as they aim to recruit the most gifted CEOs with the relevant set of competences in order to meet shareholders' goals and enhance bank competitiveness. JEL Codes - G23, G32, G41

Suggested Citation

  • Wafa Jilani & Jamel Chouaibi & Mihaela Onofrei & Bogdan-Narcis Firtescu & Paula-Andreea Terinte, 2021. "To What Extent does CEO Behavior Enhance Risk-Taking? A Banking Sector Related Evidence," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 68(3), pages 309-332, September.
    • Handle: RePEc:aic:saebjn:v:68:y:2021:i:3:p:309-332:n:211
    DOI: 10.47743/saeb-2021-0012
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    More about this item

    Keywords

    bank risk-taking; corporate governance; CEO behavior; CEO dominance; corporate governance; financial reporting; bank profitability;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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