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Shareholder empowerment and bank bailouts

Ferreira, Daniel, Kershaw, David, Kirchmaier, Thomas and Schuster, Edmund-Philipp (2013) Shareholder empowerment and bank bailouts. Finance working papers, 345/2013. European Corporate Governance Institute (ECGI), Brussels, Belgium.

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Abstract

We propose a management insulation index based on banks’ charter and by-law provisions and on the provisions of the applicable state corporate law that make it difficult for shareholders to oust a bank’s management. We show that banks in which managers were more insulated from shareholders in 2003 were roughly 18 to 26 percentage points less likely to be bailed out in 2008/09. We also find that banks in which the management insulation index was reduced between 2003 and 2006 were more likely to be bailed out. We discuss alternative interpretations of the evidence. The evidence is mostly consistent with the hypothesis that banks in which shareholders were more empowered performed poorly during the crisis.

Item Type: Monograph (Working Paper)
Official URL: http://www.ecgi.org/index.htm
Additional Information: © 2013 The Authors
Library of Congress subject classification: H Social Sciences > HG Finance
K Law > K Law (General)
Sets: Departments > Finance
Departments > Law
Research centres and groups > Financial Markets Group (FMG)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 345/2013
Date Deposited: 13 Mar 2014 13:42
URL: http://eprints.lse.ac.uk/56083/

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