Publication

A CEO's expertise power and bank diversification

Authors
Ali, M, Gan, Christopher, Nadeem, M
Date
2023-02-23
Type
Journal Article
Collections
Department of Financial and Business Systems
Keywords
bank diversification, CEO's expertise power, competition, governance, strategic decisions
Fields of Research
ANZSRC::350207 International finance, ANZSRC::350204 Financial institutions (incl. banking), ANZSRC::350299 Banking, finance and investment not elsewhere classified, ANZSRC::3501 Accounting, auditing and accountability, ANZSRC::3502 Banking, finance and investment, ANZSRC::3801 Applied economics
Abstract
We examine the effect of a chief executive officer (CEO)'s expertise power on bank diversification. Using US bank data from 1990 to 2020, we find that a CEO's expertise power is positively associated with bank diversification. Market competition and board composition (size and independence) positively affect this relationship. We also find that CEO delta and vega are the underlying mechanisms through which expertise power leads to greater diversification. We address endogeneity concerns using the two-stage least squares, Heckman estimation and the difference-in-differences approaches and check result robustness in several ways. We provide a new explanation for bank diversification that is useful for policymakers in developing a bank strategy concerning CEO behaviour in diversification.
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Permalink
https://hdl.handle.net/10182/16209
Source DOI
10.1111/acfi.13070
Rights
© 2023 The Authors. Accounting & Finance published by John Wiley & Sons Australia, Ltd on behalf of Accounting and Finance Association of Australia and New Zealand.
Creative Commons Rights
Attribution-NonCommercial-NoDerivatives
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