Supervisory boards, financial crisis and bank performance: do board characteristics matter?

• Type: Article in International Scientific Journal
• Date: 2017-11

Authors

Jorge Farinha (Author) FEP; Catarina Fernandes (Author) Other; Francisco Vitorino Martins (Author) FEP; Cesário Mateus (Author) Other

Journal

Title: Journal of Banking Regulation

Vol. 18 No. 4

Pages: 310-337

ISSN: 1745-6452

Publisher: Springer Nature

Indexing

ISI Web of Knowledge - 0 Citations

Scopus - 40 Citations

Other information

Authenticus ID: P-00N-5FY

DOI: 10.1057/s41261-016-0037-5

Abstract (EN): Failures in governance, especially in regard to boards of directors, have been blamed for the 2007-2008 financial crisis. The increased public scrutiny regarding the actions and role of the board of directors in banks, following the crisis, inspires to examine whether and to what extent the characteristics of banks' boards influence their performance in the crisis. Using a sample of 72 publicly listed European banks, we find that banks with more independent and busy boards experienced worse stock returns during the crisis. Conversely, the better-performing banks had more banking experts serving as supervisory directors. Additionally, we find that gender and age diversity improved banks' performance during the crisis; hence, diversity matters. We also construct a governance quality index on the basis of board characteristics and conclude that governance quality positively affects banks' returns during the crisis. Overall, we find evidence that banks' performance during the financial crisis is a function of their boards' characteristics.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 28