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Was the Crisis due to a shift from stakeholder to shareholder finance? Surveying the debate

Listed author(s):
  • Giovanni Ferri

    ()

    (LUMSA, CERBE, MoFiR)

  • Angelo Leogrande

    (Universit… di Bari)

We discuss the literature on the shift from stakeholder to shareholder finance behind the Great Financial Crisis (GFC). Traditional banks generally maximized stakeholder value (STV). But before the GFC also many of them started maximizing shareholder value (SHV). Moving from STV to SHV often meant shifting credit management from Originate-to-Hold (OTH) to Originate-to-Distribute (OTD). Moving from STV-OTH to SHV-OTD increased systemic risk damaging the common good of financial stability. STV-oriented banks seemed to weather the GFC relatively better with more heterogeneous systems proving more resilient. Heterogeneity in banking governanceorientations/ownership-structures seems to add value reducing the probability of financial crises.

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Paper provided by Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences in its series Mo.Fi.R. Working Papers with number 108.

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Length: 36
Date of creation: May 2015
Handle: RePEc:anc:wmofir:108
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