Do board characteristics moderate capital adequacy regulation and bank risk-taking nexus in Sub-Saharan Africa?

Abstract

Purpose–The purpose of this paper is to examine whether board characteristics moderate the relationshipbetween capital adequacy regulation and bank risk-taking of universal banks in Sub-Saharan Africa (SSA).Design/methodology/approach–The paper uses 700 bank-year observations of universal banks in SSAbetween 2009 and 2019. The paper further uses the two-step generalized method of moments as the baselineestimator.Findings–The paper finds that capital adequacy regulation is positively related to overall bank and liquidityrisks. Nonetheless, capital adequacy regulation increases credit risk in the sampled banks. The paper furtherreports that board characteristics individually and significantly moderate the relationship between capitaladequacy regulation and risk-taking.Practical implications–The findings have implications for regulators of universal banks that boardcharacteristics matter for capital adequacy regulation to impact risk-taking behavior.Originality/value–The paper extends the existing literature on the effect of board characteristics on thecapital adequacy regulations and risk-taking behavior nexus of universal banks.