Heterogeneity in independent non-executive directors' attributes and risk-taking in large banks

Sabur Mollah*, Eva Liljeblom, Asma Mobarek

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

The extant literature suggests that complex firms can benefit from independent non-executive director (INED) quality. To address the issue of INED quality, we look at heterogeneity in the independent non-executive directors' (INEDs') attributes and explore whether this is related to risk-taking behaviour in large banks. We gather novel, hand-collected, director-level data for approximately 2400 independent non-executive directors (INEDs) of 185 global large banks from 35 countries for the period of 2004–2016, concluding that heterogeneity in INEDs' gender, financial expertise, and board tenure all influence risk-taking behaviour. Employing several identification strategies, we show that the cause seems to be heterogeneity in the INEDs' attributes, as channelled through information asymmetry. We also find that heterogeneity in the INEDs' attributes significantly mitigates bank risk-taking in the post-2009 period. Our study contributes to the literature on both the benefits of INEDs and director heterogeneity.
Original languageEnglish
Article number102074
Peer-reviewed scientific journalJournal of Corporate Finance
Volume70
Pages (from-to)1-22
ISSN0929-1199
DOIs
Publication statusPublished - 21.08.2021
MoE publication typeA1 Journal article - refereed

Keywords

  • 512 Business and Management
  • dependent non-executive director (INED)
  • Attributes heterogeneity
  • Risk-taking
  • Large banks

Sustainable Development Goals

  • GOAL 16: Peace and Justice Strong Institutions

Areas of Strength and Areas of High Potential (AoS and AoHP)

  • AoS: Financial management, accounting, and governance

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