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NManagement Board Composition of Banking Institutions and Bank Risk-Taking: The Case of the Czech Republic

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  • Diana Zigraiova

    () (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic
    Czech National Bank)

Abstract

The paper investigates how management board composition of banking institutions impacts their risk-taking behavior in the Czech Republic. More specifically, we examine the effect of average director age, proportion of female directors, non-national directors and proportion of their attained education on four different bank risk proxies. We build a unique data set comprising selected biographical information on management board members of the Czech financial institutions holding a banking license over 2001-2012 period. For the Czech banking sector overall, we find that higher proportions of non-national directors increase bank risk measured by profit volatility and decrease bank stability captured by Z-score. Similarly, a larger proportion of directors holding an MBA raises bank riskiness measured by profit volatility. On the other hand, the presence of directors holding a PhD on boards of large Czech banks enhances bank stability captured by Z-score. Moreover, we detect risk-enhancing implications of board size for the segments of building savings societies and small and midsized banks. As for average board tenure, its effect on risk-taking varies depending on bank characteristics. We find mixed evidence on the effect of female directors and do not find any strong effect of directors' age on risk in the Czech banking sector.

Suggested Citation

  • Diana Zigraiova, 2016. "NManagement Board Composition of Banking Institutions and Bank Risk-Taking: The Case of the Czech Republic," Working Papers IES 2016/02, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jan 2016.
  • Handle: RePEc:fau:wpaper:wp2016_02
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    File URL: http://ies.fsv.cuni.cz/sci/publication/show/id/5432/lang/cs
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    References listed on IDEAS

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    Cited by:

    1. Skała, Dorota & Weill, Laurent, 2018. "Does CEO gender matter for bank risk?," Economic Systems, Elsevier, vol. 42(1), pages 64-74.

    More about this item

    Keywords

    Management board composition; banks; risk-taking; panel data;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination

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