THE EFFECT OF THE EXISTENCE OF CHIEF RISK OFFICER (CRO) ON BANK PERFORMANCE

Year 2024, Volume: 8 Issue: 1, 25 - 37, 28.03.2024

Ayse Nur Gungor Bostan , Aslı Aybars

Abstract

Over the past few years, numerous studies have examined how top management affects financial performance. These studies highlight the significance of management teams' characteristics and qualities as key factors influencing firms' financial performance. This study focuses on the growing prevalence of Chief Risk Officers (CROs) in the banking industry. It aims to investigate the impact of CROs on the financial performance of banks in the North American Bank sample. The primary objective of this paper is to address the existing gap in the literature by exploring whether there are performance differences between banks that employ CROs and those that do not. The findings of this study provide evidence of a positive correlation between bank size and the presence of a Chief Risk Officer. However, no significant relationship was found between the existence of a CRO and stock return volatility or bank profitability. It was observed that banks with higher volatility levels tend to hire Chief Risk Officers as part of their management team. Consequently, the results suggest that riskier banks are more inclined to employ Chief Risk Officers compared to their safer counterparts.

Keywords

Chief risk officer (CRO), performance, bank.

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