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Does Corporate Governance Have an Effect on Performance in the European Banking Sector? Evidence from a Crisis Environment

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Author Info

  • Anastasia Stepanova

    ()
    (Corporate Finance Department, Corporate Finance Center, National Research University Higher School of Economics, Moscow, Russia)

  • Olga Ivantsova

    ()
    (Corporate Finance Department, Corporate Finance Center, National Research University Higher School of Economics, Moscow, Russia)

Abstract

After the financial crisis, the necessity to support large inefficient banks had a crucial impact on a number of economies in Europe. This paper focuses on the effect that corporate governance mechanisms has on performance for commercial banks operating in developed and emerging European markets. We test a model of market-based bank performance for a sample of 150 commercial banks from 27 European countries over a period from 2004 to 2011. As a result, we show that such governance mechanisms as ownership concentration, state ownership, board independence, and others do have a significant influence on bank performance. We also find significant differences between models for developed and emerging markets, as well as for different geographical regions. Studying the financial crisis provides us with evidence for structural movements in the relationship model between corporate governance and bank performance as a result of the 2008-2009 crisis. In general, the important determinants lose their significance after 2007. Though, due to the possible endogeneity problem in our models, we should be cautious when interpreting the causality of connections between factors.

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Bibliographic Info

Paper provided by National Research University Higher School of Economics in its series HSE Working papers with number WP BRP 10/FE/2012.

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Length: 29 pages
Date of creation: 2012
Date of revision:
Publication status: Published in WP BRP Series: Financial Economics / FE, December 2012, pages 1-29
Handle: RePEc:hig:wpaper:10/fe/2012

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Related research

Keywords: Corporate Governance; Bank Performance; Commercial Banks; Independent Directors; Ownership Structure; Financial Architecture; Emerging Markets;

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References

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  1. Yermack, David, 1996. "Higher market valuation of companies with a small board of directors," Journal of Financial Economics, Elsevier, Elsevier, vol. 40(2), pages 185-211, February.
  2. Adams, Renée B. & Ferreira, Daniel, 2009. "Women in the boardroom and their impact on governance and performance," Journal of Financial Economics, Elsevier, Elsevier, vol. 94(2), pages 291-309, November.
  3. Robert Lensink & Ilko Naaborg, 2007. "Does foreign ownership foster bank performance?," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 17(11), pages 881-885.
  4. Micco, Alejandro & Panizza, Ugo & Yanez, Monica, 2007. "Bank ownership and performance. Does politics matter?," Journal of Banking & Finance, Elsevier, vol. 31(1), pages 219-241, January.
  5. Mohamed Belkhir, 2009. "Board of directors' size and performance in the banking industry," International Journal of Managerial Finance, Emerald Group Publishing, Emerald Group Publishing, vol. 5(2), pages 201-221, April.
  6. Duchin, Ran & Matsusaka, John G. & Ozbas, Oguzhan, 2010. "When are outside directors effective?," Journal of Financial Economics, Elsevier, Elsevier, vol. 96(2), pages 195-214, May.
  7. Berger, Allen N. & Hasan, Iftekhar & Zhou, Mingming, 2009. "Bank ownership and efficiency in China: What will happen in the world's largest nation?," Journal of Banking & Finance, Elsevier, vol. 33(1), pages 113-130, January.
  8. Shams Pathan & Michael Skully & J. Wickramanayake, 2007. "Board Size, Independence and Performance: An Analysis of Thai Banks," Asia-Pacific Financial Markets, Springer, Springer, vol. 14(3), pages 211-227, September.
  9. Panagiotis Staikouras & Christos Staikouras & Maria-Eleni Agoraki, 2007. "The effect of board size and composition on European bank performance," European Journal of Law and Economics, Springer, Springer, vol. 23(1), pages 1-27, February.
  10. 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.
  11. Pi, Lynn & Timme, Stephen G., 1993. "Corporate control and bank efficiency," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 515-530, April.
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Cited by:
  1. Andrei Vernikov, 2013. "Does Corporate Governance Really Predict Firms’ Market Values in Emerging Markets? The Case of Russian Banks," HSE Working papers, National Research University Higher School of Economics WP BRP 12/MAN/2013, National Research University Higher School of Economics.

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