Bank governance, regulation, supervision, and risk reporting: Evidence from operational risk disclosures in European banks

By A. Barakat, K. Hussainey. 2013

282 citations recorded by the source corpus.

This paper investigates the direct and joint effects of bank governance, regulation, and supervision on the quality of risk reporting in the banking industry, as proxied for by operational risk disclosure (ORD) quality in European banks. After controlling for the endogeneity between bank stability and risk reporting quality, we find that banks having a higher proportion of outside board directors, lower executive ownership, concentrated outside non-governmental ownership, and more active audit committee, and operating under regulations promoting bank competition (i.e., less stringent entry to banking requirements) provide ORD of higher quality. In addition, we find that the contribution of bank supervisors to the enhancement of ORD quality depends on the ownership structure of the bank. Specifically, powerful and independent bank supervisors mitigate the incentives for entrenched bank executives to withhold voluntary ORD. Moreover, bank supervisors and largest shareholders perform substitutive roles in monitoring the bank management's compliance with mandatory ORD requirements. For the sake of enhancing risk reporting quality in banks, our findings recommend sustaining board independence, enhancing audit committee activity, easing entry to banking requirements, and promoting a more proactive role for bank supervisors.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/66b971248d0410a6d9401af5af0dab68e46039a5

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

In Finance

Citations in the corpus

Islamic Governance, National Governance, and Bank Risk Management and Disclosure in MENA Countries (2017, methodology): “Noticeably, the extant research has examined a wide range of motivations and antecedents of RDPs (e.g., Abdallah et al., 2015; Barakat & Hussainey, 2013; Dobler et al., 2011; Ntim et al., 2013).”
The impact of multi-layer governance on bank risk disclosure in emerging markets: the case of Middle East and North Africa (2019, methodology): “…but there are extensive prior empirical studies that suggest that they can impact on the level of bank risk disclosures (Abraham & Cox, 2007; Barakat & Hussainey, 2013; Beretta & Bozzolan, 2004; Cabedo & Tirado, 2004; Elshandidy et al., 2013; Elshandidy & Neri, 2015; Ntim et al., 2013;…”
Board structure and corporate risk taking in the UK financial sector (2017, background): “Likewise, Barakat and Hussainey (2013) argue that by taking outside directors on their corporate boards European banks could enhance their own risk disclosure mechanisms.”
Corporate governance and risk disclosure: evidence from Saudi Arabia (2019, unknown): “This result confirms the suggestions of agency, resources-dependence and stakeholders’ theories that separation of board Chairperson and CEO positions could affect positively the corporate performance and disclosure (Jensen, 1993; Barako et al., 2006; Tsamenyi et al. 2007; Ntim et al., 2013). This r”
Sharia supervisory boards, governance structures and operational risk disclosures: Evidence from Islamic banks in MENA countries (2020, background): “However, and notwithstanding its importance, prior studies investigating the association between CG and operational risk disclosures (ORDs) within banks generally, and in Islamic banks, in particular, are rare (Barakat & Hussainey, 2013).”
The association between risk disclosure and firm characteristics: a meta-analysis (2016, background): “Recent research shows variations between companies in reporting risk information (Baraket and Hussainey 2013; Elshandidy, Fraser, and Hussainey 2013).”
Is forward-looking financial disclosure really informative? Evidence from UK narrative statements (2015, unknown): “For instance, prior studies (e.g., Barakat & Hussainey, 2013) find a negative association between managerial ownership and voluntary disclosure.”