Does Corporate Governance Have an Effect on Performance in the European Banking Sector? Evidence from a Crisis Environment
AbstractAfter 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 InfoPaper provided by National Research University Higher School of Economics in its series HSE Working papers with number WP BRP 10/FE/2012.
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
Corporate Governance; Bank Performance; Commercial Banks; Independent Directors; Ownership Structure; Financial Architecture; Emerging Markets;
Find related papers by JEL classification:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
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