Risk Governance and Banks Affiliated to Business Groups. the Case of Mexico

Abstract: The aim of the present work is to study the effect of risk governance on the profitability of a sample of listed banks in Mexico during the period 2007-2015. To conduct this analysis, a dynamic panel data model is used, and also a random effects model. The evidence presented here shows that functions of risk governance have an impact of only slight significance on the profitability of banks, which suggests that the dispositions and recommendations for risk governance are only fulfilled in a limited way. One possible explanation for this finding is related to patterns of ownership structure, due to the presence of banks linked to business groups, that give risk management a secondary role while other objectives are given greater emphasis. These banks co-exist with foreign banks from developed economies, which creates contrasting patterns of corporate governance.