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Banks and managerial discipline: Does regulatory monitoring play a role?

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  • Palvia, Ajay A.

Abstract

This paper examines the impact of performance, board independence, and regulatory evaluations on CEO turnover in a recent sample of banks. Similar to earlier studies, the results suggest weak performance and greater board independence are positively related to CEO turnover. In addition, poor regulatory ratings and recent rating downgrades are found to have a positive impact on turnover, not fully explained by performance or board characteristics. Finally, the relation between CEO turnover and weak regulatory evaluations is only significant for banks with more independent boards. Overall, the results are consistent with the view that regulatory monitoring enhances managerial discipline in banks but that such discipline may be severely limited in banks with less independent boards.

Suggested Citation

  • Palvia, Ajay A., 2011. "Banks and managerial discipline: Does regulatory monitoring play a role?," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(1), pages 56-68, February.
  • Handle: RePEc:eee:quaeco:v:51:y:2011:i:1:p:56-68
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Kick, Thomas & Nehring, Inge & Schertler, Andrea, 2017. "Do all new brooms sweep clean? Evidence for outside bank appointments," Journal of Banking & Finance, Elsevier, vol. 84(C), pages 135-151.
    2. Gaul, Lewis & Palvia, Ajay, 2013. "Are regulatory management evaluations informative about bank accounting returns and risk?," Journal of Economics and Business, Elsevier, vol. 66(C), pages 1-21.
    3. repec:eee:jaecon:v:64:y:2017:i:1:p:37-55 is not listed on IDEAS
    4. Luo, Yongli, 2015. "CEO power, ownership structure and pay performance in Chinese banking," Journal of Economics and Business, Elsevier, vol. 82(C), pages 3-16.
    5. Inoguchi, Masahiro, 2013. "Interbank market, stock market, and bank performance in East Asia," Pacific-Basin Finance Journal, Elsevier, vol. 25(C), pages 136-156.
    6. repec:spt:apfiba:v:7:y:2017:i:6:f:7_6_6 is not listed on IDEAS
    7. Ajay A. Palvia, 2012. "Management Turnover, Regulatory Oversight and Performance: Evidence from Community Banks," Chapters,in: Research Handbook on International Banking and Governance, chapter 26 Edward Elgar Publishing.
    8. Lerong He & Rong Yang, 2014. "Does Industry Regulation Matter? New Evidence on Audit Committees and Earnings Management," Journal of Business Ethics, Springer, vol. 123(4), pages 573-589, September.

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