How Did the Banks Restore Their Financial Health After the First Strikes of the War in Ukraine? Was it the Impact of Improved Corporate Governance, or Central Bank Supervision?

This paper examines the role of corporate governance and prudential supervision in mitigating the detrimental effects of the initial russian military invasion on the financial health of Ukrainian banks. We find that shock exposure depends on the scale of banking activity and pre-war credit risk assessments in the affected regions. This research provides evidence that enhanced governance and prudential supervision contributed positively to restoring bank financial positions following the initial attacks. Our findings demonstrate that central bank supervision yields a health-restoring effect primarily for war-sensitive banks, provided that these banks comply with regulatory requirements. Conversely, independent supervisory boards contribute more significantly to the recovery of unaffected banks. These results are robust and offer practical policy implications for both bankers and regulators.