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Supervisory boards, financial crisis and bank performance: do board characteristics matter?

Author

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  • Catarina Fernandes

    (Polytechnic Institute of Bragança
    Cef.up - Center for Economics and Finance at University of Porto)

  • Jorge Farinha

    (Cef.up - Center for Economics and Finance at University of Porto
    University of Porto)

  • Francisco Vitorino Martins

    (University of Porto)

  • Cesario Mateus

    (University of Greenwich)

Abstract

Failures in governance, especially in regard to boards of directors, have been blamed for the 2007–2008 financial crisis. The increased public scrutiny regarding the actions and role of the board of directors in banks, following the crisis, inspires to examine whether and to what extent the characteristics of banks’ boards influence their performance in the crisis. Using a sample of 72 publicly listed European banks, we find that banks with more independent and busy boards experienced worse stock returns during the crisis. Conversely, the better-performing banks had more banking experts serving as supervisory directors. Additionally, we find that gender and age diversity improved banks’ performance during the crisis; hence, diversity matters. We also construct a governance quality index on the basis of board characteristics and conclude that governance quality positively affects banks’ returns during the crisis. Overall, we find evidence that banks’ performance during the financial crisis is a function of their boards’ characteristics.

Suggested Citation

  • Catarina Fernandes & Jorge Farinha & Francisco Vitorino Martins & Cesario Mateus, 2017. "Supervisory boards, financial crisis and bank performance: do board characteristics matter?," Journal of Banking Regulation, Palgrave Macmillan, vol. 18(4), pages 310-337, November.
  • Handle: RePEc:pal:jbkreg:v:18:y:2017:i:4:d:10.1057_s41261-016-0037-5
    DOI: 10.1057/s41261-016-0037-5
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    5. Saleh F. A. Khatib & Dewi Fariha Abdullah & Ahmed A. Elamer & Raed Abueid, 2021. "Nudging toward diversity in the boardroom: A systematic literature review of board diversity of financial institutions," Business Strategy and the Environment, Wiley Blackwell, vol. 30(2), pages 985-1002, February.
    6. V.M. Morais Pereira & J.A. Candeias Bonito Filipe, 2018. "Quality of Board Members’ Training and Bank Financial Performance: Evidence from Portugal," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 47-79.
    7. repec:ers:journl:v:vi:y:2018:i:3:p:47-79 is not listed on IDEAS
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    More about this item

    Keywords

    corporate Governance; performance; banks; financial crisis;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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