Risk governance, market competition and operational risk disclosure quality: A study of the ASEAN-5 banking sector

Etikah Karyani, Oluwaseun Kolade, Setio Anggoro Dewo

Research output: Contribution to journalArticlepeer-review

Abstract

This paper investigates the impact of risk governance and market competition on banks’ operational risk disclosure (ORD) quality (total and voluntary) in the Association of Southeast Asian Nations (ASEAN-5) banking sector. Using 285 firm-year observations encompassing the period 2010–14 for risk governance indexes, we investigate the moderating effects of market competition, relative to total risk governance practices, on banks’ ORD quality. The results of our panel data analysis show that there is a substitution effect of competition, which could reduce the adverse con-sequences of weak risk governance practices. However, governance factors – such as the chief risk officer’s (CRO’s) role and independence, and the risk communication system – decrease voluntary ORD quality. These findings have implications for the role of the financial regulator in using market competition as an effective mechanism to replace banks’ weak risk governance, thus encouraging banks to improve their ORD quality. This study contributes to existing knowledge by providing new empirical insights into ongoing debates about the complementary or substitutionary role of competition policies and corporate governance practices.

Original languageEnglish
JournalJournal of Operational Risk
Volume16
Issue number2
DOIs
Publication statusPublished - Jun 2021

Keywords

  • Chief risk officer
  • Market competition
  • Operational risk disclosure
  • Risk governance
  • Substitute

Fingerprint

Dive into the research topics of 'Risk governance, market competition and operational risk disclosure quality: A study of the ASEAN-5 banking sector'. Together they form a unique fingerprint.

Cite this