With co-author Yacine Belghitar of Cranfield University, a new study examines CEO Chairman duality and its relation to risk-taking. The research process was revealing, to say the least. Based on much of the existing literature domain, there was a good argument that duality would be associated with greater bank risk taking, based on arguments previously made by Faleye & Krishnan (2010), Chen & Ebrahim (2018) and importantly Lu & Boateng (2018). Whilst approaching the research without bias, such findings in a US based new sample was new but not unexpected. What was unexpected was to see such a stark difference in BHC duality and risk-taking when the sample was delimited between highly and less regulated firms, determined by the SIFI/Dodd Frank designation.
As argued by Krause et al. 2014 and Hardwick et al. (2011), there is strong evidence in our research that governance monitoring mechanisms, whether from the board, board-level committees or external regulatory supervisors, can be substituted, at least as US commercial bank risk-taking goes. This means that the costs and trade offs of this governance mechanism may be assessed more holistically. Moreover, the benefits of unity of command that comes with CEO Chairman roles may be still achieveble without evidence of excessive risk-taking occuring. I might know one or two CEO Chairman who might tell me... "Told you so, things are not so simple now are they!".
As commercial banks globally face arguably thier biggest challenge in a the current COVID driven economy/lockdown with the prospects of greater loan losses and management challenges, governance structures may really make the difference. We hope you enjoy the research. The SpringerNature link to the research published last week in the Journal of Quantitative Finance & Accounting can be found here:https://rdcu.be/b5BAX.