Management insulation and bank failures

Ferreira, Daniel ORCID: 0000-0003-4590-8429, Kershaw, David ORCID: 0000-0002-6691-4687, Kirchmaier, Tom and Schuster, Edmund (2021) Management insulation and bank failures. Journal of Financial Intermediation, 47. ISSN 1042-9573

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Abstract

How does management insulation from shareholder pressure influence banks’ resilience to crises? To address this question, we develop a measure of management insulation based on legal provisions. Unlike the existing alternatives, our measure considers the interactions between different provisions. We use this measure to study the relationship between management insulation and bank failure during the 2007-09 financial crisis. We find that banks in which managers were more insulated from shareholders in 2003 were less likely to be both bailed out in 2008/09 and targeted by activist shareholders. By contrast, alternative measures of management insulation fail to predict both bailouts and shareholder activism.

Item Type:	Article
Official URL:	https://www.sciencedirect.com/journal/journal-of-f...
Additional Information:	© 2021 Elsevier Inc
Divisions:	Finance Law
Subjects:	H Social Sciences > HG Finance H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Date Deposited:	11 May 2021 10:30
Last Modified:	09 Nov 2024 03:54
URI:	http://eprints.lse.ac.uk/id/eprint/110428

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