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European Banks’ Legal Provisions and Financial Crises: The Influence of Corporate Governance and Institutional Environment

Author

Listed:
  • Jorge Gallud Cano

    (Universidad de Valladolid, Valladolid, Spain)

  • Felix J.Lopez-Iturriaga

    (Universidad de Valladolid, Valladolid, Spain
    National Research University Higher School of Economics, Perm, Russia)

  • Oscar Lopez-De-Foronda Perez

    (University of Burgos, Burgos, Spain)

Abstract

We study the legal provisions of 92 European systemic banks from 18 countries over the years 2008-2017. Since legal provisions may be viewed as a mechanism for disclosing information to capital markets, the creation of legal provisions is determined by the risk taken by the bank and the managerial incentives to disclose information. Our results show an initial negative relationship between managers’ discretionary investments and legal provisions, even when we control for risk taking. We also find that board of director independence has a moderating effect in order to guard against future lawsuits. Similarly, a better institutional framework amplifies the positive influence of the board of directors.

Suggested Citation

  • Jorge Gallud Cano & Felix J.Lopez-Iturriaga & Oscar Lopez-De-Foronda Perez, 2020. "European Banks’ Legal Provisions and Financial Crises: The Influence of Corporate Governance and Institutional Environment," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 70(1), pages 70-93, February.
    • Handle: RePEc:fau:fauart:v:70:y:2020:i:1:p:70-93
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    File URL: http://journal.fsv.cuni.cz/mag/article/show/id/1455
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    Cited by:

    1. Samuel Kwaku Agyei & Nathaniel Kwapong Obuobi & Mohammed Zangina Isshaq & Mac Junior Abeka & John Gartchie Gatsi & Ebenezer Boateng & Emmanuel Kwakye Amoah, 2022. "Country-Level corporate governance and Foreign Portfolio Investments in Sub-Saharan Africa: The moderating role of institutional quality," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2106636-210, December.

    More about this item

    Keywords

    legal provisions; risk; corporate governance; institutional framework; European banks;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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