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This is the accepted version of the paper.This version of the publication may differ from the final published version. Keywords: board composition; bank ownership; systemic risk; financial crisis JEL classification: G01; G21; G32 Permanent repository link IntroductionCorresponding authorThe role of corporate governance in banking has been highlighted by academics as well as by regulators and policy makers (see e.g. Basle Committee on Banking Supervision, 2010;Organization for Economic Co-operation and Development, 2010). Many academic studies emphasize how flaws in bank governance played a key role in the performance of banks during the crisis (Diamond and Rajan, 2009;Bebchuk and Spamann, 2010, Beltratti andStulz, 2012). Since the 2007, an increasing number of proposals and initiatives have attempted to identify and mitigate these flaws revealed by the financial crisis (Kirkpatrick, 2009) aiming to promote better corporate governance standards in banking, while recognizing the special nature of banks when compared to other firms. On the other hand, the financial crisis revealed the dramatic impact of excessive risktaking behaviour of banks on the global financial stability, especially in terms of underestimated consequences of unregulated systemic risk-taking. As the literature has widely investigated poor or weak corporate governance as well as the increasing systemic nature of the banking sector as major causes of the crisis, to the best of our knowledge there is still a limited understanding of the relationship between corporate governance characteristics and banks' incentive to become more expose to systemic risk. As suggested by de Andres and Vallelado (2008), the aim of banking regulators to reduce the runs and their systemic consequences on the stability of the system might come into conflict with the main purpose of shareholders which is to improve the shareholders value by also increasing risk-taking. Taking on risks and tail and systemic risks, in particular, may enhance bank performance in the short run (i.e. by increasing the leverage), but it can cause significant damage to the institution and the whole system when such risks materialize (i.e. fire sales "effects"). During the global financial crisis, European banks exposed themselves to tail and systemic risks in various ways. Among others, the most recent literature has highlighted how European banks' exposures to tail risks in the form of shadow banking activities were later transformed into severe losses on the balance sheets (Acharya et al., 2013: Arteta et al., 2013).An increase in systemic and tail risks by large banks could be supported by the implicit too-big-to fail guarantee and the reduced market discipline (Acharya et al.,2010). In fact, it could be difficult, both for outsiders and insiders, to distinguish between risk-taking activities that generate high returns and those that offer high returns as compensation for taking tail risk through complex and opaque activities (Ellul and Yerramilli, 2013). In this context, the presence of a s...

This article analyses the cost and profit efficiencies of cooperative banks. Cooperative banks are small financial institutions providing financial services in several local geographical areas, and they play a fundamental role in various European banking systems. Even though these small financial institutions present a homogeneous business model, their performance is strongly influenced by the economic conditions of their local markets. The efficiency measurement has to account for the heterogeneity of the environmental conditions. By using a large sample of Italian cooperative banks (2683 year observations) collected between 2000 and 2005, we estimated the cost and profit efficiency using Stochastic Frontier Analysis (SFA) and including various environmental variables accounting for disparities among Italian regions. We show that environmental conditions substantially influence efficiency estimates: banks in the Northeast of Italy are shown to be the more cost efficient, benefiting from a favourable environment, while banks in the South of Italy display a higher profit efficiency, probably due to lower competitive pressures. We show that the coefficients for branches and the concentration of cooperative banks with respect to other banks are important both on the cost side and the profit sid

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The recent financial crisis has raised several questions with respect to the corporate governance of financial institutions. This paper investigates whether boards of directors and risk management-related corporate governance mechanisms are associated with a better bank performance during the financial crisis of 2007/2008 for a sample of Chinese and Indian listed banks. We measure market bank performance by Tobin’ Q and price-earnings ratio. In line with the previous literature on US banks, we find the general irrelevance of the standard board’s variables when specific variables related to the risk committee are included in the analysis. We find that the market valuation and the expected market growth (Tobin’ Q and P/E) are larger for banks with smaller risk committee. In particular, we find that the market valuation is negatively associated with the size of the risk committee and positively associated with the number of the risk committee’ meetings. This seems to suggest that the market discounts as favorable the information related to “strong” risk governance