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Governance and Shareholder Response to Chief Risk Officer Appointments

Author

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  • Manu Gupta

    (301, W. Main Street, School of Business, Virginia Commonwealth University, Snead Hall, Richmond, VA 23284, U.S. E-mails: mgupta2@vcu.edu; pprakash@vcu.edu; nkrangan@vcu.edu)

  • Puneet Prakash

    (301, W. Main Street, School of Business, Virginia Commonwealth University, Snead Hall, Richmond, VA 23284, U.S. E-mails: mgupta2@vcu.edu; pprakash@vcu.edu; nkrangan@vcu.edu)

  • Nanda Rangan

    (301, W. Main Street, School of Business, Virginia Commonwealth University, Snead Hall, Richmond, VA 23284, U.S. E-mails: mgupta2@vcu.edu; pprakash@vcu.edu; nkrangan@vcu.edu)

Abstract

This study examines the recent, significant growth in the appointments of Chief Risk Officers (CROs), the role of a CRO, and whether such appointments benefit shareholders. We find that the market is more likely to react positively to a CRO appointment for a firm with weak corporate governance. In particular, the lower the proportion of outside directors the greater is the likelihood of a positive market reaction to CRO appointments, suggesting that CRO appointments are associated with better future governance by firms’ shareholders. Finally, firms with higher tax and product risk also experience increases in stock prices when they appoint CROs.

Suggested Citation

  • Manu Gupta & Puneet Prakash & Nanda Rangan, 2012. "Governance and Shareholder Response to Chief Risk Officer Appointments," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 37(1), pages 108-124, January.
  • Handle: RePEc:pal:gpprii:v:37:y:2012:i:1:p:108-124
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