Risk culture and cost of capital – insight from European banks

Acheampong, A ORCID: https://orcid.org/0000-0002-9489-5751 and Ibeji, N, 2024. Risk culture and cost of capital – insight from European banks. Economics Letters, 243: 111906. ISSN 0165-1765

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Abstract

This study examines the impact of risk culture on the cost of capital (i.e., WACC, Cost of equity and cost of debt) in European banks. We measure risk culture using comprehensive textual analysis approach. Based on 134 banks from 2005 to 2022, findings reveal that risk culture is negatively associated with all cost of capital measures. This indicates that robust risk culture reduces information asymmetry and boosts investor confidence, leading to lower costs of capital. Our findings reflect the importance of aligning risk management practices with regulatory requirements and investor expectations.

Item Type:	Journal article
Publication Title:	Economics Letters
Creators:	Acheampong, A. and Ibeji, N.
Publisher:	Elsevier BV
Date:	October 2024
Volume:	243
ISSN:	0165-1765
Identifiers:	Number Type 10.1016/j.econlet.2024.111906 DOI S0165176524003902 Publisher Item Identifier 2237620 Other
Rights:	This accepted manuscript is shared under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY-NC-ND).
Divisions:	Schools > Nottingham Business School
Record created by:	Melissa Cornwell
Date Added:	07 Oct 2024 09:46
Last Modified:	07 Oct 2024 09:46
URI:	https://irep.ntu.ac.uk/id/eprint/52364

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