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Does espoused risk culture pay? Evidence from European banks

Bianchi, Nicola and Carretta, Alessandro and Farina, Vincenzo and Fiordelisi, Franco (2021) 'Does espoused risk culture pay? Evidence from European banks.' Journal of Banking and Finance, 122. ISSN 0378-4266

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Abstract

A poor risk culture was one of the causes of the financial crisis. Surprisingly, there is no evidence of the link between risk culture and bank stability. Using a large sample of European banks from 2004 to 2017, our paper shows that a sound risk culture leads to better performance. Our research design is based on three steps. First, we developed a new Sound Risk Culture Indicator based on the Financial Stability Board (2014) risk culture framework. Second, we estimated this new metric by applying Quantitative Text Analysis. Third, we used an IV 2SLS panel data approach to establish a causal link between bank risk culture and profitability.

Item Type: Article
Uncontrolled Keywords: Risk culture, Performance, Banking, Text analysis, Stability
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Elements
Date Deposited: 19 May 2021 21:30
Last Modified: 20 May 2021 09:14
URI: http://repository.essex.ac.uk/id/eprint/30215

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