Risk management and supervisory board characteristics database
used in Andrieș A.M., Brown, M. (2017) Credit booms and busts in emerging markets: The role of bank governance and regulation, Economics of Transition, 25(3): 377-437 DOI:10.1111/ecot.12127
A. Our first set of indicators assesses the quality of risk management within a bank.
1. The variable CRO Present captures whether a Chief Risk Officer (CRO) responsible for bank-wide risk management is present within the bank.
2. The indicator CRO Executive captures whether the CRO is an executive officer of the bank.
3. The indicator Risk committee is equal to 1 if the bank has a dedicated committee solely charged with monitoring and managing risk-management efforts within the bank.
4. The indicator Reports to board identifies whether the risk committee reports directly to the bank's board of directors instead of to the CEO. The Basel Committee on Banking Supervision (BCBS, 2010) considers that the risk committee, responsible for advising the board on the bank’s overall current and future risk tolerance/appetite and strategy, and for overseeing senior management’s implementation of that strategy, should be at a board-level.
Based on our four indicators of risk management, we create a composite Risk management index
B. Our second set of indicators assesses corporate governance as measured by the size and structure of the supervisory board.
5. The indicator Board size is measured as the natural logarithm of the number of directors on a bank’s board.
6. We measure Board expertise by the share of expert members on the board. Similar to Güner et al. (2008) and Minton et al. (2014), we classify a member of the supervisory board as an expert if he or she (i) has worked within a banking institution, (ii) currently works at a non-bank financial institution, (iii) has a finance-related role within a non-financial firm (among others, CFO, accountant, treasurer, or VP finance), (iv) has a finance-related role within an academic institution (among others, professor in finance, accounting, economics, business or financial law), or (v) has an economic studies background.
7. The indicator Board independence measures the share of independent outside directors on the supervisory board. Following Aebi et al. (2012), we define independent members of the board as members without any relationship with the company - including the parent bank - except for their board seat.
8. The indicator Board foreign captures the share of foreign members on the supervisory board. Following Bogaard and Sonkova (2013), we define foreign members of the board as members from the parent country of a foreign bank or from third countries.
Based on our four indicators of board size and structure we calculate a Supervisory board index