Independent directors’ connectedness and bank risk-taking

Amin A., Mollah S., Kamal S., Zhao Y., ŞİMŞEK R.

Journal of Financial Stability, cilt.75, 2024 (SSCI) identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 75
  • Basım Tarihi: 2024
  • Doi Numarası: 10.1016/j.jfs.2024.101324
  • Dergi Adı: Journal of Financial Stability
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus, EconLit
  • Anahtar Kelimeler: Independent directors’ connectedness, Network centrality, Risk-taking
  • Bilecik Şeyh Edebali Üniversitesi Adresli: Evet

Özet

This study examines the role of independent directors’ network centrality in bank risk-taking. Following the shareholder-incentive hypothesis and social-network theory, we predict and find that independent directors’ connectedness is positively associated with bank risk-taking. The results hold after a battery of robustness checks and endogeneity tests. Furthermore, consistent with the influence channel of networks, we show that connectedness empowers independent directors, whereas influential independent directors facilitate aggressive investment. We also find that the risk-taking effects are more pronounced for complex banks and banks with higher equity capital, higher income diversity, and lower cost-efficiency.