Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212303 
Authors: 
Year of Publication: 
2014
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 28/2014
Publisher: 
Bank of Finland, Helsinki
Abstract: 
Failure in bank corporate governance has been seen as a contributing factor to excessive risk-taking pre-crisis with devastating implications as risks realised during the financial crisis. Unfortunately, the empirical evidence on the impact of managerial incentives on bank crisis performance is scarce. Moreover, bank strategy has not previously been accounted for. Hence, this paper presents novel findings on drivers for risk-taking and crisis performance. Specifically, I find a positive impact of management ownership in small diversified banks and non-traditional banks, the monitoring of which is challenging due to their opacity. The impact is negative in traditional banks and large diversified banks, indicating that shareholders induce managers to take risk where the safety net creates incentives for risk-shifting to debt holders and taxpayers. These findings have implications for both academic research as well as policy making particularly in the domain of corporate governance.
Subjects: 
banks crisis performance
management ownership
traditional vs. nontraditional banking
diversification
safety net
bank opacity and complexity
JEL: 
G01
G21
G28
G32
L25
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-007-1
Document Type: 
Working Paper

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