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The Reverse Revolving Door in the Supervision of European Banks

Author

Listed:
  • Stefano Colonnello

    (Department of Economics, University Of Venice CÃ Foscari; Halle Institute For Economic Research (IWH), Italy)

  • Michael Koetter

    (Halle Institute for Economic Research (IWH); Otto-von-Guericke University Magdeburg; Deutsche Bundesbank, Germany)

  • Alex Sclip

    (University of Verona, Italy)

  • Konstantin Wagner

    (Halle Institute for Economic Research (IWH))

Abstract

We show that the presence of executive directors with prior experience in the finance industry is pervasive on the boards of European national banking supervisors. Up to one executive out of three has previously held positions in the industry she supervises (or in closely connected ones). Appointments of such executives impact more favorably bank valuations than those of executives without a finance background. The proximity to supervised banks rather than superior financial expertise or intrinsic skills appears to drive the positive differential effect of finance-related executives. Finally, the presence of former finance professionals in the board of banking authorities associates with lower regulatory capital and faster growth of banks,pointing to a more lenient supervisory style.

Suggested Citation

  • Stefano Colonnello & Michael Koetter & Alex Sclip & Konstantin Wagner, 2022. "The Reverse Revolving Door in the Supervision of European Banks," Working Papers 2022:12, Department of Economics, University of Venice "Ca' Foscari".
    • Handle: RePEc:ven:wpaper:2022:12
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    More about this item

    Keywords

    Revolving Doors; Banking Supervision; Conflicts of Interest;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • 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

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