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The credit crisis around the globe: Why did some banks perform better?

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  • Beltratti, Andrea
  • Stulz, René M.
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    Abstract

    Though overall bank performance from July 2007 to December 2008 was the worst since the Great Depression, there is significant variation in the cross-section of stock returns of large banks across the world during that period. We use this variation to evaluate the importance of factors that have been put forth as having contributed to the poor performance of banks during the credit crisis. The evidence is supportive of theories that emphasize the fragility of banks financed with short-term capital market funding. The better-performing banks had less leverage and lower returns immediately before the crisis. Differences in banking regulations across countries are generally uncorrelated with the performance of banks during the crisis, except that large banks from countries with more restrictions on bank activities performed better and decreased loans less. Our evidence poses a substantial challenge to those who argue that poor bank governance was a major cause of the crisis because we find that banks with more shareholder-friendly boards performed significantly worse during the crisis than other banks, were not less risky before the crisis, and reduced loans more during the crisis.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0304405X11002790
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 105 (2012)
    Issue (Month): 1 ()
    Pages: 1-17

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    Handle: RePEc:eee:jfinec:v:105:y:2012:i:1:p:1-17

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    Web page: http://www.elsevier.com/locate/inca/505576

    Related research

    Keywords: Credit crisis; Bank performance; Bank fragility; Capital; Regulation; Governance;

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    Cited by:
    1. Cimadomo, Jacopo & Hauptmeier, Sebastian & Zimmermann, Tom, 2012. "Fiscal consolidations and banking stability," MPRA Paper 42229, University Library of Munich, Germany.
    2. Daniel Ferreira & David Kershaw & Tom Kirchmaier & Edmund Schuster, . "Shareholder Empowerment and Bank Bailouts," FMG Discussion Papers dp714, Financial Markets Group.
    3. Adrian Van Rixtel & Gabriele Gasperini, 2013. "Financial crises and bank funding: recent experience in the euro area," BIS Working Papers 406, Bank for International Settlements.
    4. Michiel Bijlsma & Andrei Dubovik & Bas Straathof, 2013. "How Large was the Credit Crunch in the OECD?," CPB Discussion Paper 232, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Ruben Enikolopov & Maria Petrova & Sergey Stepanov, 2012. "Firm Value in Crisis: Effects of Firm-Level Transparency and Country-Level Institutions," Working Papers w0184, Center for Economic and Financial Research (CEFIR).

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