Governance and bank characteristics in the credit and sovereign debt crises – the impact of CEO power

Mollah, Sabur; Liljeblom, Eva

Abstract

The global financial sector recently suffered from two interrelated crises: the credit crisis and the sovereign debt crisis. A common question is whether the recent experience with the credit crisis has helped in dealing with the sovereign debt crisis. We study more specifically whether banks with powerful CEOs perform better or worse than other banks, and if there is any difference in this relationship between the two crises. Using unique hand-collected data for 378 large global banks, we find that CEO power has a significant positive relation to bank profitability and asset quality, but also to insolvency risk, during the sovereign debt crisis. Thus, strong CEOs do not appear to be detrimental to bank performance. Our results also support the idea that deposit insurance may have contributed to the credit crisis.

Citation

Mollah, S., & Liljeblom, E. (2016). Governance and bank characteristics in the credit and sovereign debt crises – the impact of CEO power. Journal of Financial Stability, 27(December), 59-73. https://doi.org/10.1016/j.jfs.2016.09.003

• Journal Article Type: Article
• Acceptance Date: Sep 21, 2016
• Online Publication Date: Sep 24, 2016
• Publication Date: 2016-12
• Deposit Date: Nov 2, 2016
• Publicly Available Date: Mar 27, 2018
• Journal: Journal of financial stability
• Print ISSN: 1572-3089
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 27
• Issue: December
• Pages: 59-73
• DOI: https://doi.org/10.1016/j.jfs.2016.09.003
• Keywords: Global large banks; CEO power; Bank performance; Credit and sovereign debt crises
• Public URL: https://hull-repository.worktribe.com/output/444833
• Publisher URL: http://www.sciencedirect.com/science/article/pii/S1572308916300997
• Additional Information: This is the accepted manuscript of an article published in Journal of financial stability, 2016. The version of record is available at the DOI link in this record.