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Organisational culture and bank risk

Author

Listed:
  • Suss, Joel

    (Bank of England)

  • Bholat, David

    (Bank of England)

  • Gillespie, Alex

    (London School of Economics and Political Science)

  • Reader, Tom

    (London School of Economics and Political Science)

Abstract

Existing research has largely relied on employee surveys to measure organisational culture despite the significant shortcomings of this approach. We use multiple, unobtrusive sources of data to gain rich insights into bank culture without ever having to ask employees to ‘show us your culture’. Our measure is based on 20 individual indicators from six different sources, including information on internal fraud cases, customer complaints, and the quality of regulatory submissions. We use this data to investigate the hypothesised relationship between organisational culture and bank risk. We find robust evidence that poor culture leads to substantially higher risk, demonstrating the importance of bank culture for prudential outcomes.

Suggested Citation

  • Suss, Joel & Bholat, David & Gillespie, Alex & Reader, Tom, 2021. "Organisational culture and bank risk," Bank of England working papers 912, Bank of England.
  • Handle: RePEc:boe:boeewp:0912
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    More about this item

    Keywords

    Culture; bank risk; supervision;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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