CEO power, government monitoring, and bank dividends

Onali, Enrico; Galiakhmetova, Ramilya; Molyneux, Philip; Torluccio, Giuseppe

doi:10.1016/j.jfi.2015.08.001

Cited by 114 publications

(89 citation statements)

References 60 publications

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“…CEO ownership is recognized as one of the good sources of power both in theory and in practice (Finkelstein 1992;Onali et al 2016;Wu et al 2011). The major determinant of agent-principal relationship in the agency theory is the ownership of the company.…”

Section: Ceo Ownershipmentioning

confidence: 99%

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CEO characteristics and firm performance: focus on origin, education and ownership

Saidu

2019

J Glob Entrepr Res

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This study examines the impact of the chief executive officer's (CEO) ownership, education and origin on firm performance. The study uses balanced panel data for 6 years from 2011 to 2016 to run ordinary least square regression. Three variables that include the CEO origin, education and ownership are investigated in relation to firm performance. These characteristics are some of the basic CEO characteristics that are rarely considered by prior studies. The study uses a sample from firms in the financial sector listed on the Nigerian Stock Exchange from 2011 to 2016. The findings indicate that CEO education improves profitability. Similarly, stock performance gets improved when the CEO has prior experience of the firm before being appointed as the chief executive officer. The findings will be useful to shareholders in making an informed decision in selecting the right CEO to manage the firm. Further studies need to consider not only the CEO ownership, but also whether the interest in ownership makes them more powerful.

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Section: Ceo Ownershipmentioning

confidence: 99%

“…The finding from the study revealed that CEO ownership has positive impact on firm performance. In the same manner, Onali et al (2016) examined the degree of firm leadership influence on firm performance of European banks. The study also attempted to find the impact of the power on dividend policy using a 9-year panel data.…”

Section: Ceo Ownershipmentioning

confidence: 99%

CEO characteristics and firm performance: focus on origin, education and ownership

Saidu

2019

J Glob Entrepr Res

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“…Pressure towards excessive risk-taking is mitigated by the presence of endogenous and exogenous governance mechanisms (that is, the supervision exerted by the board of directors and regulators respectively), as well as by executives showing a lower propensity to risk vis-à-vis shareholders, as the former ones put the value of their human capital on the labour market and, thus, their private benefits at risk (Laeven and Levine, 2009). Shareholders tend to mitigate such misalignment by means of compensation policy, often linked to stock market performance (De Young et al 2013), or dividend policy (Onali et al 2016). Moreover, agency costs and asymmetric information are reduced in the presence of efficient capital markets.…”

Section: Related Literaturementioning

confidence: 99%

The Risk Weighted Ownership Index: An Ex-Ante Measure of Banks’ Risk and Performance

2019

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Attributing ratings to the top-20 owners, we construct a Risk-Weighted Ownership index (RWO) to measure the profitability and risk-taking behaviour of the ownership structure at banks. Collecting data from 19 European countries plus the UK over the 2008-2017 period, preliminary results show strong evidence that RWO measures are significant in explaining bank performance and risk, at both an accounting and a market-based level. Overall, these results suggest that not only markets and regulators should look at bank's owners: instead, it is far more relevant to assess the contribution carried by top-owners to bank risk, both individually and collectively. JEL Classification: G21, G32period. First of all, we aggregate data of owner identity and percentages of ownership. Second, we gather the ratings released by Credit Rating Agencies (CRAs) -when available -or calculate it by referencing to either the Bank Z-Score or the Altman Z-Score (depending upon the owner's identity, whether financial or non-financial), based on the hypothesis that credit risk is correlated with equity risk (recently: Bai et al. 2017;Bekaert and Hoerova, 2016;Han et al., 2017). Where it was not possible to assign an idiosyncratic rating, we opted to attribute the rating of the country (systematic rating).On this dataset, we measure the RWO by assigning weighting coefficients pursuant to the Basel 1 framework, in relation to each owner's identity only, or Basel 2, by considering each owner's rating too. Then, we account for the effect of the single owner on the ownership structure by multiplying Basel coefficients by the percentage stake in the bank's capital. Hence, we can build two types of RWO index: one encompassing the sole identity of top-20 owners, another considering their "quality" too.Controlling for other corporate governance characteristics and regulatory environment, our preliminary results show strong evidence that RWO measures are relevant in explaining bank performance and risk, at both an accounting and a market-based level.The relevance of our findings is twofold. First, the RWO might be used as an early-warning indicator to signal when increasing the level of risk in bank decision-making is expected. This yields many remarkable implications in terms of stock market performance and volatility: also, considering the cross-correlation between financial markets. To policymakers, our results suggest that regulators, who already supervise banks' ownership structure, should not only look at whom owns the bank but, also, devote particular attention to analysing the risk appetite of potential owners, still within the context of the already-existing shareholding base.Our paper contributes to the emerging body of research by investigating the ways in which the ownership structure and specific categories of owners affect a bank's risk-taking. Compared to the extant literature, our paper is the first to propose a methodology to measure the risk-return profile of a bank's shareholding base as a driver of ex-ante risk-taking. In addition, we...

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“…Thus, the lack of qualifications in the board composition and general management are undoubtedly the major causes of the bankruptcy of several banks around the world. More specifically, according to Datar (2004) and Onali and Torluccio (2016), BOD plays a fundamental role in determining the structure of banks' ownership and the level of their FP. Also, this mechanism is responsible for developing control procedures to manage the various risk situations to which the bank could be exposed.…”

Section: Introductionmentioning

confidence: 99%

Effect of board quality on the financial performance of conventional and Islamic banks: Comparative study on the international evidence

Haddad¹,

Ammari²,

Bouri³

2020

Preprint

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This article provides the first logical analysis that detailed the process of comparative analysis between the correlation of board determinants’ quality and the financial performance of conventional and Islamic banks. However, in previous research, we have never encountered rewarding studies that compared these impacts. In our study, we distinguished between the impact of the board of directors on the financial performance in conventional and Islamic banks. Settings of the financial performance and board of directors of the conventional and Islamic banks are collected from 30 countries located in four continents: America, Europe, Asia, and Africa. Two equal samples were collected that each of them is composed of 112 banks. By using the cylindrical panel method, data were used to explore the impact of the board of directors on the financial performance between both types of banks over the period 2010-2018, giving us 1008 bank-year observations in each sub-sample. On the whole, empirical results have shown that in conventional banks the board of directors has negatively affected the financial performance, while the impact of the board on the financial performance of Islamic banks is ambiguous. Nevertheless, the degree of the positive impact on financial performance is more significant in Islamic banks.

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CEO power, government monitoring, and bank dividends

Cited by 114 publications

References 60 publications

CEO characteristics and firm performance: focus on origin, education and ownership

CEO characteristics and firm performance: focus on origin, education and ownership

The Risk Weighted Ownership Index: An Ex-Ante Measure of Banks’ Risk and Performance

Effect of board quality on the financial performance of conventional and Islamic banks: Comparative study on the international evidence

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