Corporate Governance in Banks

Project Start:01/2013
Status:Completed
Researchers:Marie Lalanne, Uwe Walz
Category: Financial Intermediation, Systemic Risk Lab, Transparency Lab, Experiment Center
Funded by:LOEWE

The corporate governance of banks differs considerably from the governance of non-financial firms. Besides the traditional stakeholders (debt and equity holders), banks have the government as an additional stakeholder (directly via government ownership of banks and indirectly via e.g. bailout guarantees). Government interventions on corporate governance of banks result in incentives for banks to become interconnected.

Interconnectedness between banks is based on different channels. Besides the traditionally investigated channels, such as connection through interbank loans, derivatives etc., interconnectedness via social networks of bankers has recently become increasingly important. Managers and directors of banks often have social ties to other banks/firms managers that have an influence on the behavior of banks. These social ties potentially lead to e.g. higher investment correlation of different financial institutions and more homogenous behavior and thus to higher systemic risk.

The aim of this project was to address important aspects of the corporate governance of banks, including bank executives´ compensation schemes and their effects on capital structure and investment decisions of a bank. Furthermore, the project analyzed the incentives for banks to be interconnected as well as internal solutions for bank´s leverage and asset risk choices. The project relied on diverse methodologies, including microeconomic modelling, lab experiments as well as empirical analysis based on data from the field.

 

Related Published Papers

Author/sTitleYearProgram AreaKeywords
Christian Eufinger, Andrej GillIncentive-Based Capital Requirements
Management Science
2017 Financial Intermediation, Systemic Risk Lab, Transparency Lab, Experiment Center Basel III, capital regulation, compensation, leverage, risk
Tim Eisert, Christian EufingerInterbank Networks and Backdoor Bailouts: Benefiting from Other Banks’ Government Guarantees
Management Science
2019 Financial Intermediation, Systemic Risk Lab, Transparency Lab, Experiment Center bailout, cycle flows, cyclical liabilities, interbank network, leverage

Related Working Papers

No.Author/sTitleYearProgram AreaKeywords
10Interbank Network and Bank Bailouts: Insurance Mechanism for Non-Insured Creditors?2013 Financial Intermediation, Systemic Risk Lab, Transparency Lab, Experiment Center bailout, cycle flows, cyclical liabilities, interbank network, leverage
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