The importance of board risk oversight in times of crisis.

This study investigates the relationship between board risk oversight practices at financial institutions in the EU and systemic risk during the sovereign debt crisis. More specifically, we examine whether European banks and insurance companies that had strong board-level risk oversight in place before the onset of the sovereign debt crisis fared better during the crisis. We construct a risk oversight index based on publicly available, hand-collected data, which captures the strength of the institutions' board-level risk governance practices. We find that financial institutions with stronger board risk oversight prior to the crisis were less vulnerable to the sovereign debt crisis, after controlling for other factors. The results are consistent and economically relevant for SRISK, probability of default, and Delta-CoVaR, three measures of systemic risk that are commonly used in the context of financial institutions