Did Good Cajas Extend Bad Loans? Governance, Human Capital and Loan Portfolios
AbstractDid financial institutions with better governance arrangements weather the recent financial crisis better? And how about those with more qualified chairmen? We answer these questions in the context of the Spanish Savings and Loans (Cajas). We find that neither formal governance institutions (e.g. the way the board is appointed) nor real governance (e.g. the actual composition of the board and the role played by political parties in it) are highly correlated with the composition of the loan book at the peak of the financial crisis (the size of the portfolios of real estate and individual loans) or with the performance of these loans (the amount of non performing loans in the crisis or the decrease in ratings). On the other hand, we find a clear and significant impact of the human capital of the Caja chairmen on the measures of loan book composition and performance. In particular, we find that (1) Cajas whose chairman was previously a political appointee have had significantly worse loan performance; (2) Cajas whose chairman did not have postgraduate education have significantly worse performance; and (3) Cajas whose chairman had no banking experience had significantly worse performance.We examine the implications of these findings for our understanding of the origins of the crisis and for the future regulation of the Cajas.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by FEDEA in its series Working Papers with number 2010-08.
Date of creation: Feb 2010
Date of revision:
Contact details of provider:
Web page: http://www.fedea.net
Other versions of this item:
- Vicente, Cuñat & Luis, Garicano, 2010. "Did Good Cajas Extend Bad Loans? Governance, Human Capital and Loan Portfolios," MPRA Paper 42434, University Library of Munich, Germany.
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Oliver Hart & John Moore, 2005.
"On the Design of Hierarchies: Coordination versus Specialization,"
Journal of Political Economy,
University of Chicago Press, vol. 113(4), pages 675-702, August.
- Oliver Hart & John Moore, 1999. "On the Design of Hierarchies: Coordination Versus Specialization," Harvard Institute of Economic Research Working Papers 1880, Harvard - Institute of Economic Research.
- Hart, Oliver D. & Moore, John, 2005. "On the Design of Hierarchies: Coordination Versus Specialization," Scholarly Articles 3448676, Harvard University Department of Economics.
- Oliver Hart & John Moore, 1999. "On the Design of Hierarchies: Coordination Versus Specialization," NBER Working Papers 7388, National Bureau of Economic Research, Inc.
- Oliver Hart & John Moore, 2004. "On the Design of Hierarchies: Coordination versus Specialization," ESE Discussion Papers 117, Edinburgh School of Economics, University of Edinburgh.
- Oliver Hart & John Moore, 1999. "On the Design of Hierarchies: Coordination Versus Specialization," STICERD - Theoretical Economics Paper Series 375, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Asim Ijaz Khwaja & Atif Mian, 2005. "Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market," The Quarterly Journal of Economics, MIT Press, vol. 120(4), pages 1371-1411, November.
- Garcia-Cestona, Miguel & Surroca, Jordi, 2008. "Multiple goals and ownership structure: Effects on the performance of Spanish savings banks," European Journal of Operational Research, Elsevier, vol. 187(2), pages 582-599, June.
- Matvos, Gregor & Ostrovsky, Michael, 2008. "Cross-ownership, returns, and voting in mergers," Journal of Financial Economics, Elsevier, vol. 89(3), pages 391-403, September.
- Atif Mian & Amir Sufi & Francesco Trebbi, 2008.
"The Political Economy of the U.S. Mortgage Default Crisis,"
NBER Working Papers
14468, National Bureau of Economic Research, Inc.
- Atif Mian & Amir Sufi & Francesco Trebbi, 2010. "The Political Economy of the US Mortgage Default Crisis," American Economic Review, American Economic Association, vol. 100(5), pages 1967-98, December.
- Manuel Illueca & Lars Norden & Gregory F. Udell, 2009. "Liberalization, Corporate Governance, and Savings Banks," Mo.Fi.R. Working Papers 17, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
- Jarrad Harford & Dirk Jenter & Kai Li, 2007. "Conflicts of Interests Among Shareholders: The Case of Corporate Acquisitions," NBER Working Papers 13274, National Bureau of Economic Research, Inc.
- Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 874-904, October.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Ã?ltima oportunidad para adelantarse a los acontecimientos en el sector financiero
by Luis Garicano in Nada Es Gratis on 2011-03-17 01:06:17
- Stefanelli, Valeria & Matteo, Cotugno, 2010. "An Empirical Analysis on Board Monitoring Role and Loan Portfolio Quality Measurement in Banks," MPRA Paper 29766, University Library of Munich, Germany.
- Ana Lozano-Vivas & Miguel Meléndez-Jiménez & Antonio Morales, 2011. "With whom to merge? A tale of the Spanish banking deregulation process," SERIEs, Spanish Economic Association, vol. 2(2), pages 159-184, June.
- Andrea ÉLTETÕ, 2011. "The economic crisis and its management in Spain," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 2, pages 41-55, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carmen Arias).
If references are entirely missing, you can add them using this form.