Workforce Policies and Operational Risk: Evidence from U.S. Bank Holding Companies
Journal of Financial and Quantitative Analysis, forthcoming
68 Pages Posted: 1 Feb 2021 Last revised: 19 May 2022
Date Written: December 11, 2020
Abstract
Using supervisory data on operational losses from large U.S. bank holding companies (BHCs), we show that BHCs with socially responsible workforce policies suffer lower operational losses per dollar of total assets. The association significantly varies by the type of workforce policies and the type of operational losses. It is driven not only by small frequent losses, but also by severe tail operational risk events. Further, the risk-reducing effects of the socially responsible workforce policies are stronger for larger BHCs with more employees. Our findings have important implications for banking organization performance, risk and supervision.
Keywords: Banking; Bank Holding Companies; Operational Risk; Workforce Policies; Corporate Social Responsibility
JEL Classification: G21, G28, G29
Suggested Citation: Suggested Citation