TY - JOUR

T1 - Financial misconduct and bank risk-taking: evidence from US banks

AU - Altunbas, Yener

AU - Thornton, John

AU - Uymaz, Yurtsev

PY - 2025/3/21

Y1 - 2025/3/21

N2 - We test for a link between bank risk-taking and regulatory enforcements against US banks for financial misconduct. Misconduct-related enforcements are associated with increased bank risk-taking on several measures of risk, and there is some evidence that the impact of enforcements on risk-taking is accentuated in the presence of powerful CEOs and a higher proportion of institutional investor ownership and mitigated when executive boards are larger, older, more independent, more gender diverse, busier, and where independent directors are relatively inexperienced. The results are robust to alternative measures of bank risk-taking, and alternative estimation techniques, including controlling for endogeneity bias.

AB - We test for a link between bank risk-taking and regulatory enforcements against US banks for financial misconduct. Misconduct-related enforcements are associated with increased bank risk-taking on several measures of risk, and there is some evidence that the impact of enforcements on risk-taking is accentuated in the presence of powerful CEOs and a higher proportion of institutional investor ownership and mitigated when executive boards are larger, older, more independent, more gender diverse, busier, and where independent directors are relatively inexperienced. The results are robust to alternative measures of bank risk-taking, and alternative estimation techniques, including controlling for endogeneity bias.

KW - Bank risk-taking

KW - financial misconduct

KW - CEO power

KW - executive boards

KW - institutional investors

U2 - 10.1016/j.jbankfin.2025.107433

DO - 10.1016/j.jbankfin.2025.107433

M3 - Article

JO - Journal of Banking and Finance

JF - Journal of Banking and Finance

SN - 0378-4266

M1 - 107433

ER -