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

Mollah, Sabur; Liljeblom, Eva

Authors

Sabur Mollah

Eva Liljeblom



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). doi:10.1016/j.jfs.2016.09.003. ISSN 1572-3089

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
Copyright Statement ©2018, Elsevier. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
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.

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