Risk Governance and Bank Performance

Abstract

Global discourse is geared towards greater accountability and regulatory oversight of banks to promote sound financial systems and charter value. The authors applied dynamic pool panel analysis to investigate the relationship between risk governance and financial performance among African global banks spanning the years 2015 to 2020. They find significant positive association between financial experts on risk committee and bank profitability. The results further reveal that risk committee activism as a proxy for risk committee effectiveness significantly increase bank profitability. Therefore, stakeholders must prioritize regular risk committee meetings and attach importance to risk committee compositions with finance experts on the majority. Additionally, this study offers policy implications for regulators and bank mangers to clearly define risk committee financial experts and minimum financial experts required to serve on the risk committee.