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Board Accountability and Risk Taking in Banking: Evidence from a Quasi-Experiment

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  • Tobias Körner

    () (German Council of Economic Experts c/o Federal Statistical Office)

Abstract

In this paper, a law reform is evaluated that aimed at improving the corporate governance of banks by tightening accountability and legal liability of outside directors. The causal effect of the reform on bank risk is identified by difference-in-differences and triple differences strategies. The estimation results show that banks subject to the reform increased capital and liquidity ratios. Hence, designing board-level governance can be an effective policy tool for altering the risk-taking behavior of banks.

Suggested Citation

  • Tobias Körner, 2017. "Board Accountability and Risk Taking in Banking: Evidence from a Quasi-Experiment," Journal of Financial Services Research, Springer;Western Finance Association, vol. 52(3), pages 155-190, December.
  • Handle: RePEc:kap:jfsres:v:52:y:2017:i:3:d:10.1007_s10693-016-0252-3
    DOI: 10.1007/s10693-016-0252-3
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    More about this item

    Keywords

    Corporate governance; Outside directors; Legal liability; Bank risk;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K20 - Law and Economics - - Regulation and Business Law - - - General

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