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Corporate Control in Commercial Banks

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  • Prowse, Stephen
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    Abstract

    Unique factors in commercial banks' legal and regulatory environment may influence their mechanisms of corporate control. I investigate this issue in a sample of U.S. bank holding companies (BHCs) by analyzing how many underwent a change in corporate control by hostile takeover, friendly merger, management turnover by the board, or intervention by regulators I compare the relative importance of these methods with those in nonfinancial firms. I relate the use of these methods to BHC board and ownership structure and performance. I find that the most important corporate control mechanism in banks is regulatory intervention, and that the primary market-based corporate control mechanism is action by the board of directors. Overall, however, BHC boards are much less assertive than their counterparts at nonfinancial firms. I examine reasons for this.

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    Bibliographic Info

    Article provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.

    Volume (Year): 20 (1997)
    Issue (Month): 4 (Winter)
    Pages: 509-27

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    Handle: RePEc:bla:jfnres:v:20:y:1997:i:4:p:509-27

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    Web page: http://www.southwesternfinance.org/
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    Cited by:
    1. Azofra, Valentín & Santamaría, Marcos, 2011. "Ownership, control, and pyramids in Spanish commercial banks," Journal of Banking & Finance, Elsevier, vol. 35(6), pages 1464-1476, June.
    2. repec:onb:oenbwp:y::i:48:b:1 is not listed on IDEAS
    3. Went, Peter, 2003. "A quantitative analysis of qualitative arguments in a bank merger," International Review of Financial Analysis, Elsevier, vol. 12(4), pages 379-403.
    4. Sinha, Rajeeva, 2006. "Regulation: The market for corporate control and corporate governance," Global Finance Journal, Elsevier, vol. 16(3), pages 264-282, March.
    5. Mark Flannery, 2001. "The Faces of “Market Discipline”," Journal of Financial Services Research, Springer, vol. 20(2), pages 107-119, October.
    6. Wang, Hongxia & Sakr, Sameh & Ning, Yixi & Davidson III, Wallace N., 2010. "Board composition after mergers, does it matter to target shareholders?," Journal of Empirical Finance, Elsevier, vol. 17(5), pages 837-851, December.
    7. Robert DeYoung & Kenneth Spong & Richard J. Sullivan, 1999. "Who's minding the store? motivating and monitoring hired managers at small, closely held firms: the case of commercial banks," Working Paper Series WP-99-17, Federal Reserve Bank of Chicago.
    8. Lisa Barrow & Cecilia Elena Rouse, 2000. "Using Market Valuation to Assess the Importance and Efficiency of Public School Spending," Econometric Society World Congress 2000 Contributed Papers 1446, Econometric Society.
    9. Wang, Wei-Kang & Lu, Wen-Min & Lin, Yi-Ling, 2012. "Does corporate governance play an important role in BHC performance? Evidence from the U.S," Economic Modelling, Elsevier, vol. 29(3), pages 751-760.
    10. Robert R. Bliss & Mark J. Flannery, 2000. "Market discipline in the governance of U.S. Bank Holding Companies: monitoring vs. influencing," Working Paper Series WP-00-3, Federal Reserve Bank of Chicago.
    11. Anderson, Christopher W. & Campbell, Terry II, 2004. "Corporate governance of Japanese banks," Journal of Corporate Finance, Elsevier, vol. 10(3), pages 327-354, June.
    12. Andres, Pablo de & Vallelado, Eleuterio, 2008. "Corporate governance in banking: The role of the board of directors," Journal of Banking & Finance, Elsevier, vol. 32(12), pages 2570-2580, December.
    13. Matthias Köhler, 2012. "Ownership structure, regulation and the market for corporate control in the EU banking sector," European Journal of Law and Economics, Springer, vol. 34(1), pages 173-196, August.
    14. Robert R. Bliss, 2001. "Market discipline and subordinated debt: a review of some salient issues," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 24-45.
    15. Howell, Jann C. & Stover, Roger D., 2002. "How much do governance and managerial behavior matter in investment decisions? Evidence from failed thrift auctions," Journal of Corporate Finance, Elsevier, vol. 8(3), pages 195-211, July.
    16. Webb Cooper, Elizabeth, 2009. "Monitoring and governance of private banks," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(2), pages 253-264, May.
    17. Hart, Jeffrey R. & Apilado, Vince P., 2002. "Inexperienced banks and interstate mergers," Journal of Economics and Business, Elsevier, vol. 54(3), pages 313-330.
    18. Fatma Cebenoyan & A. Sinan Cebenoyan & Elizabeth S. Cooperman, 2003. "Regulatory Regimes and Takeovers of U.S. Thrifts," Hunter College Department of Economics Working Papers 303, Hunter College: Department of Economics.
    19. Li, Li & Song, Frank M., 2013. "Do bank regulations affect board independence? A cross-country analysis," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 2714-2732.
    20. Cook, Douglas O. & Hogan, Arthur & Kieschnick, Robert, 2004. "A study of the corporate governance of thrifts," Journal of Banking & Finance, Elsevier, vol. 28(6), pages 1247-1271, June.
    21. Huberto M. Ennis, 2001. "On the size distribution of banks," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 1-25.

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