Confusion between the CEO and chairman: Empirical evidence of effects on bank risk and performance

We investigate whether factors beyond agency conflict are important in bank governance. Specifically, we examine the possibility that confusion and overlap between the roles of CEO and Chairman have important effects on bank risk and return. Using a new data set for UK banks over the period 2003-2012 and controlling for risk-return simultaneity we find that having a Joint CEO-Chairman lowers risk because it alleviates confusion between roles. We also document that oversight by a Remuneration Committee and Non-Executive Directors (NEDs) lowers the probability of bank failure, indicating that empowering an independent Chairman has different effects from empowering independent NEDs. Overall, our results show the importance of accounting for the heterogeneity in actors and behaviours within banks.