The Impact of Corporate Governance on the Adoption of Enterprise Risk Management (ERM) Practices by Banks in Zimbabwe


Authors : Cosmas Kanhai

Volume/Issue : Volume 8 - 2023, Issue 7 - July

Google Scholar : https://bit.ly/3TmGbDi

Scribd : https://tinyurl.com/54d354uz

DOI : https://doi.org/10.5281/zenodo.8245625

Abstract : The purpose of this paper is to establish the relationship between corporate governance and the adoption of Enterprise Risk Management by banks in Zimbabwe. The research was based on 26 banking institutions in Zimbabwe and primary data on enterprise risk management practices was collected through questionnaires which were distributed to chief risk officers/risk/managers of the banks. Secondary data on corporate governance variables was collected through a review and analysis of published financial statements of the banking institutions for the year ended 31 December 2011. The study results revealed that that board independence and ownership structures are essential elements that influence the decision to adopt ERM by banks in Zimbabwe. However the research found that the size of the board has no relationship with the extent of adoption of ERM. The research also found out that owner managed banks (i.e. with directors’ ownership concentration) are unlikely to adopt ERM while those with institutional shareholders concentration are more likely to adopt decisions to implement ERM. The study recommended the regulatory authorities to ensure that there is separation of ownership and management in banks to avoid abuse of structures through overbearing influence by ‘owner managers’ This research therefore concluded that corporate governance has important implications on the extent of adoption of ERM by banking institutions in Zimbabwe.

Keywords : Corporate governance, ownership concentration, enterprise risk management, financial stability.

The purpose of this paper is to establish the relationship between corporate governance and the adoption of Enterprise Risk Management by banks in Zimbabwe. The research was based on 26 banking institutions in Zimbabwe and primary data on enterprise risk management practices was collected through questionnaires which were distributed to chief risk officers/risk/managers of the banks. Secondary data on corporate governance variables was collected through a review and analysis of published financial statements of the banking institutions for the year ended 31 December 2011. The study results revealed that that board independence and ownership structures are essential elements that influence the decision to adopt ERM by banks in Zimbabwe. However the research found that the size of the board has no relationship with the extent of adoption of ERM. The research also found out that owner managed banks (i.e. with directors’ ownership concentration) are unlikely to adopt ERM while those with institutional shareholders concentration are more likely to adopt decisions to implement ERM. The study recommended the regulatory authorities to ensure that there is separation of ownership and management in banks to avoid abuse of structures through overbearing influence by ‘owner managers’ This research therefore concluded that corporate governance has important implications on the extent of adoption of ERM by banking institutions in Zimbabwe.

Keywords : Corporate governance, ownership concentration, enterprise risk management, financial stability.

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