Ownership concentration and market value of European banks

Busta, Ilduara; Sinani, Evis; Thomsen, Steen

doi:10.1007/s10997-012-9223-8

Cited by 29 publications

(22 citation statements)

References 48 publications

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“…However, a higher ownership concentration is associated with better loan quality, lower asset risk, and lower insolvency risk. Busta, Sinani, and Thomsen () investigate the relationship between ownership concentration and market value of European banks over a 13‐year period (1993–2005). They argue that this relationship is influenced by different institutional settings.…”

Section: Governance Mechanismsmentioning

confidence: 99%

Corporate Governance in Banks

John¹,

Masi²,

Paci³

2016

Corporate Governance

129

112

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Manuscript Type: ReviewResearch Question/Issue: We survey the literature on corporate governance in banks in the US and international settings. We discuss how the specialness of banks, deposit insurance, high bank leverage, and bank regulation interact with bank governance. We evaluate bank governance from three perspectives: (1) maximizing bank equity value, (2) maximizing total enterprise value, and (3) maximizing social objectives. Our survey includes evidence on how bank governance differs from that of manufacturing firms. We also survey studies on managerial incentives in banks and their implications for bank performance and risk taking before and during the 2007-2008 financial crisis.Research Findings/Insights: The high leverage (usually above 90 percent) of banking institutions gives rise to a trade-off between strengthening equity governance and maximizing enterprise value. Aligning managers very closely with shareholders can give rise to strong incentives for risk shifting to the detriment of firm value. The bank risk choices might also go against the societal objectives of a stable financial system. Theoretical/Academic Implications: We provide a framework for the optimal design of bank governance and bank regulation, considering the objectives of both depositors and society-at-large in addition to those of bank shareholders. This framework could be especially important in determining risk choices by banks and the effects of such on the stability of the financial system. Practitioner/Policy Implications: Our analysis of the literature surveyed has policy implications for bank regulation, top-management compensation in banks, and directives for design of governance in banks. We discuss implications for direct regulation of banks and regulation of bank governance. The findings surveyed provide guidance for board independence, board size, board composition, and incentive features in top-management compensation.

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Section: Governance Mechanismsmentioning

confidence: 99%

Corporate Governance in Banks

John¹,

Masi²,

Paci³

2016

Corporate Governance

129

112

View full text Add to dashboard Cite

show abstract

“…Market value is a crucial parameter for judgments of banks, as well as for their categorization (Cornett and Tehranian 2004;Fissel et al 2006;Carnevale et al 2012;Busta et al 2014;Avramidis et al 2018). For the purposes of the present study, 50 banks (better to say, organizations providing banking services) with the biggest market value are considered, according to the actual ranking (World Top Banking 2020).…”

Section: Bank Selection and Statements Availabilitymentioning

confidence: 99%

Lost in Missions? Employees as a Top Strategic Priority of the World’s Biggest Banks

Ruban

Yashalova

2021

JRFM

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Human resources are vitally important to banking. The mission statements of 50 banks with the biggest market value are analyzed qualitatively and quantitatively for subsequent judgments of consideration of employees among top strategic priorities of these organizations. The staff-related notions are found in the only 30% statements. Employees are considered in different aspects, and most frequently in regard to their work and duties. The top 10 banks pay attention to personnel development, career, and success. The findings of the present study indicate on the underrepresentation of the staff-related strategic priority in the mission statements of the world’s biggest banks. This seems to be a serious cavity in their strategic communication, dangerous to organization reputation and job satisfaction, and, thus, many actual mission statements need improvement.

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“…If liquidity allows raising agency costs (Attig et al, 2013;Bushman et al, 2018;Busta et al, 2014;Flannery, 1994;Jensen & Meckling, 1976;Myers & Rajan, 1998), then liquid assets provide accessible ways to reinvest in other assets when prices are low and reduce same investing risks by ensuring that an investor will be able to quickly react to market moves (Brunnermeier and Yogo, 2009). The intrinsic liquidity production has been extensively discussed by, among others, Diamond and Dybvig (1983), Diamond & Rajan (2001), Gorton & Pennacchi (1990), Holmström & Tirole (1998), Holmström & Tirole (1998) and Gorton & Winton (2017).…”

Section: Bank Characteristics Liquidity and Bank Valuationmentioning

confidence: 99%

Investors’ expectations around quantitative easing: does liquidity injection affect European banks equally?

2021

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The role of liquidity in the banking industry is increasingly under the spotlight since the Global Financial Crisis (GFC) in 2007. Prior evidence offers contrasting findings on the role played by liquidity in banks: whilst it ensures systemic financial stability, at the same time it raises agency costs. Notwithstanding this, European banks benefited from a generous liquidity injection following the launch of the Quantitative Easing (QE) programme by the European Central Bank (ECB) in 2015–2016. We leverage on the release of the QE and investigate whether investors’ reactions to the announcements of new liquidity injections vary according to bank-level characteristics of the European banks: namely, their financial soundness, asset portfolio quality and the level of transparency. Our findings document an overall negative market reaction to the QE announcements; at a more fine-grained level of analysis we highlight that banks falling short of the regulatory requirements are not expected to benefit from additional liquidity. This study contributes to the literature on the role of liquidity in banks by showing important boundary conditions to the beneficial role of liquidity in banks, that is—because of the regulatory capital requirements—liquidity is only valuable to investors if it can be reinvested once constraints are overcome.

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Ownership concentration and market value of European banks

Cited by 29 publications

References 48 publications

Corporate Governance in Banks

Corporate Governance in Banks

Lost in Missions? Employees as a Top Strategic Priority of the World’s Biggest Banks

Investors’ expectations around quantitative easing: does liquidity injection affect European banks equally?

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