To What Extent does CEO Behavior Enhance Risk-Taking? A Banking Sector Related Evidence

• Main Authors: Wafa Jilani, Jamel Chouaibi
• Format: Article
• Language: English
• Published: Editura Universităţii „Alexandru Ioan Cuza” din Iaşi / Alexandru Ioan Cuza University of Iasi Publishing house 2021-09-01
• Series: Scientific Annals of Economics and Business
• Subjects: bank risk-taking; corporate governance; ceo behavior; ceo dominance
• Online Access: http://saeb.feaa.uaic.ro/index.php/saeb/article/view/1219

The present paper is designed to examine the extent of the Chief Executive Officer’s (CEO) behavioral impact on the bank risk-taking venture. The sample involves a set of 540 banks, observed over a longitudinal panel data set (2007-2019). A multiple linear-regression technique has been applied. The attained results prove to highlight that when CEOs seem to enjoy a great deal of overconfidence, they are more likely to influence the board’s decision-making to their proper risk-reducing advantage. The greater the CEO dominance is, the more decreased the bank specific risk turns out to be, given the significantly positive association of CEO dominance with the risk-taking procedure. This paper's results have implication for banks and policymakers looking to promote risk-taking. This paper could be useful to shareholders as they aim to recruit the most gifted CEOs with the relevant set of competences in order to meet shareholders' goals and enhance bank competitiveness. JEL Codes - G23, G32, G41