Impact of Board Structure on Insolvency and Credit Risk: Moderating role of Domestic and Transnational Financial Liberalization in Asian Banking Sector

  • Rashida Bibi MS Scholar, Faculty of management sciences, International Islamic University Islamabad, Pakistan
  • Zaheer Abbas Assistant Professor, FMS, International Islamic University, Islamabad, Pakistan
  • Waqas Ahmad Assistant Professor, FMS, International Islamic University, Islamabad, Pakistan
  • Tahira Awan Assistant Professor, FMS, International Islamic University, Islamabad, Pakistan
Keywords: CEO/Chairman Duality, Risk Taking, Board Independence, Domestic Financial Liberalization, Transnational Financial Liberalization.

Abstract

Purpose-The aim of this study is to analyze the effect of board structure on risk-taking. It also takes financial liberalization as a moderator between board structure and risk-taking. Design/methodology/approach- Data of variables of interest has been obtained from the annual reports of banks and statistical reports published by Central Bank of concerned countries. Ten banks have been selected from every ten Asian countries during the period 2005 to 2015. GMM estimator is used for data analysis. Findings- Findings of the study reveal that both board size and board independence decrease risk-taking practices in sample economies. Further, the presence of powerful CEOs on board structure increases risk-taking. The most robust result has been proved for board independence as compared with board size and CEO/chairman duality. Financial liberalization moderates the relationship between board structure and risk-taking. Originality/value- Most of the previously published studies in this area use only one type of financial liberalization at one time. This study includes both types of financial liberalization: domestic financial liberalization and transnational financial liberalization, at one time. Laeven financial liberalization index has been created for concerned economies.

Published
2019-06-30
Section
Articles