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Implications for Bank Risk when Directors are Related to Minority Shareholders

Author

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  • Thierno Amadou Barry

    (Université de Limoges, LAPE)

  • Laetitia Lepetit

    (Université de Limoges, LAPE)

  • Frank Strobel

    (University of Birmingham)

  • Thu Ha Tran

    (Université Bourgogne Franche-Comté)

Abstract

We examine whether directors on a board who are related to minority shareholders have an effect on bank risk. We use a panel of European banks with a controlling shareholder over the period from 2003 to 2017 and find that these directors result in lower risk. Our results depend crucially on whether or not such directors have reputational concerns or financial expertise, and the level of shareholder protection; the observed decrease in risk does not depend on their position on the board or on the presence of controlling shareholders. To identify the relationship, we use a dynamic generalized method of moments.

Suggested Citation

  • Thierno Amadou Barry & Laetitia Lepetit & Frank Strobel & Thu Ha Tran, 2022. "Implications for Bank Risk when Directors are Related to Minority Shareholders," Journal of Financial Services Research, Springer;Western Finance Association, vol. 62(3), pages 233-265, December.
    • Handle: RePEc:kap:jfsres:v:62:y:2022:i:3:d:10.1007_s10693-021-00371-y
    DOI: 10.1007/s10693-021-00371-y
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    More about this item

    Keywords

    Bank governance; Bank risk; Minority shareholder related directors; Financial expertise;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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