Original scientific paper

https://doi.org/10.1080/1331677X.2021.1909490

Corporate board and default risk of financial firms

C. José García orcid.org/0000-0002-2886-3348
Begoña Herrero
Francisco Morillas

Abstract

This paper analyses the impact of corporate board structure on
default risk of European banking firms. We focus on four core
aspects of boards that have been addressed in Directive 2013/36/
EU to strengthen the corporate governance of banks: the size of
boards, their independence, the participation of female directors
and CEO duality. We employ panel data analysis to study the 109
European listed banks between 2002 and 2019. Default risk is estimated by Merton’s (1974) distance to default. We take into
account the presence of unobservable heterogeneity, simultaneity
and dynamic endogeneity and estimate the model using the
dynamic difference and dynamic system GMM methodologies.
The results show that the size of the board influences banks’
default risk. Furthermore, bank size, firm profitability and GDP
also exert a considerable influence.

Keywords

Corporate board; default risk; distance to default; European banks; Merton model

Hrčak ID:

301842

URI

https://hrcak.srce.hr/301842

Publication date:

31.3.2023.

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