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Shareholder activism in banking

Author

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  • Roman, Raluca

    () (Federal Reserve Bank of Kansas City)

Abstract

This paper conducts the first assessment of shareholder activism in banking and its effects on risk and performance. The focus is on the conflicts among bank shareholders, managers, and creditors (e.g., regulators, deposit insurer, taxpayers, depositors). This paper finds activism may generally be a destabilizing force, increasing bank risk-taking, but creating market value for shareholders, and leaving operating returns unchanged, consistent with the empirical dominance of the Shareholder-Creditor Conflict. However, during financial crises, the increase in risk disappears, suggesting activism risk incentives may be muted. From a public perspective, creditors (including the government) may lose during normal times, but not during financial crises.

Suggested Citation

  • Roman, Raluca, 2015. "Shareholder activism in banking," Research Working Paper RWP 15-9, Federal Reserve Bank of Kansas City.
  • Handle: RePEc:fip:fedkrw:rwp15-09
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    References listed on IDEAS

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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. Berger, Allen N. & El Ghoul, Sadok & Guedhami , Omrane & Roman, Raluca, 2015. "Internationalization and bank risk," Research Working Paper RWP 15-8, Federal Reserve Bank of Kansas City.

    More about this item

    Keywords

    Banking; Financial crises; Financial stability; Shareholder activism;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • 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
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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