CEOs Characteristics Affect Banks’ Risk-Taking? International Evidence

Abstract

We examined the effect of CEO characteristics on bank risk-taking.  The study collected data from of 540 international banks from 2011 to 2023, resulting in a panel that had 6,825 observations. A fixed-effects panel regression model was used to analyze the relationship between CEO attributes and risk-taking in banks. Bank risk-taking is measured by using a Z-score, non-performing loans, and standard deviation of volatility. The analysis indicates that CEOs with younger age, greater experience, and postgraduate degrees are more inclined to take on risky decisions. Furthermore, we find a significant positive relationship between CEO experience and risk-taking behavior in banks. The findings indicate that female CEOs tend to be more risk-averse than their male peers. The findings from this study have played a role in shaping regulatory policies aimed at decreasing bank risk, such as requirements for transparency in CEO decision-making and improved oversight of corporate governance practices. By analyzing a large sample of banks across different countries, the study provides empirical evidence on this relationship, contributing to the literature on corporate governance and risk management in the banking sector. The results may have important implications for regulators, shareholders and boards of directors in their assessment and selection of bank executives.