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The effect of CEO power on bank risk: Do boards and institutional investors matter?✰

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  • Altunbaş, Yener
  • Thornton, John
  • Uymaz, Yurtsev

Abstract

We test for a link between CEO power and risk taking in US banks. Banks are more likely to take risks if they have powerful CEOs and relatively poor balance sheets. There is little evidence that executive board size and independence have a dampening effect on the channels through which powerful CEOs influence risk-taking and some evidence that institutional investors reinforce the risk-taking preferences of powerful CEOs.

Suggested Citation

  • Altunbaş, Yener & Thornton, John & Uymaz, Yurtsev, 2020. "The effect of CEO power on bank risk: Do boards and institutional investors matter?✰," Finance Research Letters, Elsevier, vol. 33(C).
    • Handle: RePEc:eee:finlet:v:33:y:2020:i:c:s1544612319300674
    DOI: 10.1016/j.frl.2019.05.020
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    3. Sekścińska, Katarzyna & Rudzinska-Wojciechowska, Joanna & Kusev, Petko, 2022. "How decision-makers’ sense and state of power induce propensity to take financial risks," Journal of Economic Psychology, Elsevier, vol. 89(C).
    4. Shabir, Mohsin & Jiang, Ping & Shahab, Yasir & Wang, Peng, 2023. "Geopolitical, economic uncertainty and bank risk: Do CEO power and board strength matter?," International Review of Financial Analysis, Elsevier, vol. 87(C).
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    6. Brodmann, Jennifer & Hossain, Ashrafee & Singhvi, Meghna, 2022. "Chief executive officer power and board gender diversity," Finance Research Letters, Elsevier, vol. 44(C).

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