Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/281191 
Year of Publication: 
2023
Series/Report no.: 
IWH Discussion Papers No. 25/2023
Publisher: 
Halle Institute for Economic Research (IWH), Halle (Saale)
Abstract: 
We show that around one third of executive directors on the boards of national supervisory authorities (NSA) in European banking have an employment history in the financial industry. The appointment of executives without a finance background associates with negative valuation effects. Appointments of former bankers, in turn, spark positive stock market reactions. This 'proximity premium' of supervised banks is a more likely driver of positive valuation effects than superior financial expertise or intrinsic skills of former executives from the financial industry. Prior to the inception of the European Single Supervisory Mechanism, the presence of former financial industry executives on the board of NSA associates with lower regulatory capital and faster growth of banks, pointing to a more lenient supervisory style.
Subjects: 
banking supervision
conflicts of interest
revolving door
JEL: 
G14
G21
G28
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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