How risk governance affects bank risk-taking: evidence from GCC banks on the mediating role of risk disclosure and moderating role of ownership

Purpose This study aims to enrich the understanding of how risk governance influences bank risk-taking, examining the mediating effects of risk disclosure and the moderating role of ownership structure. Design/methodology/approach This study analyzes a sample of 58 commercial banks from the Gulf Cooperation Council (GCC) countries over the period from 2013 to 2022. The primary empirical methodologies used are Structural Equation Modeling (SEM) and the Generalized Least Squares (GLS) technique. To ensure the robustness of the findings, alternative methodologies-including the Two-Stage Least Squares (2SLS) technique and the two-step system Generalized Method of Moments (GMM) approach-as well as various measures for bank risk, risk disclosure and ownership structure, are also used. Findings The empirical findings reveal a counterintuitive result. It suggest that risk governance mechanisms tend to significantly increase, rather than decrease, bank risk. For Islamic banks, risk disclosure entirely mediates the link between risk governance and risk-taking, while for conventional banks, the effect is partially mediated. Additionally, ownership moderates both the relationship between risk governance and bank risk-taking and the mediating role of risk disclosure on the association between risk governance and bank risk-taking. Originality/value Given the limited research on this topic, this paper initiates a discussion on the impact of risk governance on bank risk in GCC countries. Using a substantial sample of both conventional and Islamic banks, the study emphasizes the significance of risk disclosure and ownership structure, which should be considered when implementing a risk governance structure.