The Reverse Revolving Door in the Supervision of European Banks
Stefano Colonnello, Michael Koetter, Alex Sclip, Konstantin Wagner
IWH Discussion Papers,
No. 25,
2023
Abstract
We show that around one third of executive directors on the boards of national supervisory authorities (NSA) in European banking have an employment history in the financial industry. The appointment of executives without a finance background associates with negative valuation effects. Appointments of former bankers, in turn, spark positive stock market reactions. This „proximity premium“ of supervised banks is a more likely driver of positive valuation effects than superior financial expertise or intrinsic skills of former executives from the financial industry. Prior to the inception of the European Single Supervisory Mechanism, the presence of former financial industry executives on the board of NSA associates with lower regulatory capital and faster growth of banks, pointing to a more lenient supervisory style.
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Firm Subsidies, Financial Intermediation, and Bank Stability
Aleksandr Kazakov, Michael Koetter, Mirko Titze, Lena Tonzer
IWH Discussion Papers,
No. 24,
2022
Abstract
We use granular project-level information for the largest regional economic development program in German history to study whether government subsidies to firms affect the quantity and quality of bank lending. We combine the universe of recipient firms under the Improvement of Regional Economic Structures program (GRW) with their local banks during 1998-2019. The modalities of GRW subsidies to firms are determined at the EU level. Therefore, we use it to identify bank outcomes. Banks with relationships to more subsidized firms exhibit higher lending volumes without any significant differences in bank stability. Subsidized firms, in turn, borrow more indicating that banks facilitate regional economic development policies.
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Banking Reform, Risk-Taking, and Accounting Quality: Evidence from Post-Soviet Transition States
Yiwei Fang, Wassim Dbouk, Iftekhar Hasan, Lingxiang Li
Journal of International Accounting Research,
No. 1,
2022
Abstract
The drastic banking reform within Central and Eastern Europe following the collapse of the Soviet Union provides an ideal quasi-experimental design to examine the causal effects of institutional development on accounting quality (AQ). We find that banking reform spurs significant improvement in predictive power of earnings and reductions in earnings smoothing, earnings-inflating discretionary provisions, and avoidance of reporting losses. These effects hold under alternative model specifications and after considering concurrent institutional developments. In contrast, corporate reform shows no such effects, refuting the alternative explanation that unobserved factors affect both reform speed in general and the quality of financial reporting. We further identify four specific reformative actions that are integral to the drastic banking reform process where prudential regulation contributes the most to the observed AQ improvement. It supports the conjecture that banking reform improves AQ by reducing banks' risk-taking behaviors and, as a result, their motive behind accounting manipulation.
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Die Entwicklung der Corporate Governance deutscher Banken seit 1950
R. H. Schmidt, Felix Noth
Bankhistorisches Archiv,
No. 2,
2011
Abstract
The present paper gives an overview of the development of Corporate Governance of German banks since the 1950s. The focus will be on economic analysis. The most striking changes in Corporate Governance occurred with the ownership structure of commercial banks, in particular with the major joint-stock banks. In addition to that, the capital market has become a core element of Corporate Governance in all major German banks, which have replaced their prior concentration on the interests of a broadly defined circle of stakeholders by a one-sided concentration on shareholders’ interests. In contrast, with savings banks and cooperative cooperative banks, Corporate Governance has remained unchanged for the most part. Exceptions to this are the regional state banks: in their case, after they had turned away from traditional business models and in particular following the discontinuation of the guarantee obligation, the problems of their Corporate Governance, which were already discernible beforehand, became quite obvious. If you include the financial crisis, beginning in 2007, in the analysis, it becomes evident that it was precisely a Corporate Governance unilaterally geared to shareholders’ interest and the efficiency of the capital market that materially contributed to the evolution and widening of the crisis.
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