Shareholder Empowerment and Bank Bailouts


Daniel Ferreira
Daniel Ferreira
  • Speaker
London School of Economics and Political Science (LSE), University of London

Event Information

Type
Research Seminar
Programme
Finance
Date
Tue. 27 Mar. 2012
Contact
Time
15:30-17:00 hours
E-mail
Location
Mandeville Building T3-42
Number


Abstract

We investigate the hypothesis that shareholder empowerment may have led to more bank bailouts during the recent financial crisis. To test this hypothesis, we propose a management insulation index based on banks’ charter and by-law provisions and on the provisions of the applicable state corporate law that make it difficult for shareholders to oust a firm’s management. Our index is both conceptually and practically different from the existing alternatives. In a sample of US commercial banks, we show that management insulation is a good predictor of bank bailouts: banks in which managers are fully insulated from shareholders are roughly 17 to 27 percentage points less likely to be bailed out. We also find that banks in which the management insulation index was reduced between 2003 and 2007 are more likely to be bailed out. We discuss alternative interpretations of the evidence. The evidence is mostly consistent with the hypothesis that banks in which shareholders were more empowered performed poorly during the crisis.
Download Ferreira's paper Shareholder Empowerment and Bank Bailouts
 
Contact information:
Elvira Sojli
Email

This event is an Erasmus Finance Seminar. The Erasmus Finance Seminar series brings prominent researchers in Finance from all over the world to Rotterdam.

Elvira Sojli
  • Coordinator