The effect of board size and composition on bank efficiency

This paper analyzes the relationship between board structure, in terms of board size and composition, and bank performance. Unlike previous studies, the present analysis is carried out within a stochastic frontier framework. To this end, bank performance is proxied by both cost and profit efficiency, measures that present considerable advantages over simple accounting ratios. The empirical framework formed is applied to a panel of large European banks operating during the period 2002-2006. We find that board size negatively affects banks’ cost and profit efficiency, while the impact of board composition on profit efficiency is non-linear. Finally, introducing risk-taking (credit risk) as an interaction component of board size and composition does not affect the robustness of the results.Corporate governance; Board size and composition; Bank cost and profit efficiency; Stochastic frontier analysis

Regulations, competition and bank risk-taking in transition countries

This study investigates whether regulations have an independent effect on bank risk-taking or whether their effect is channeled through the market power possessed by banks. Given a well-established set of theoretical priors, the regulations considered are capital requirements, restrictions on bank activities and official supervisory power. We use data from the Central and Eastern European banking sectors over the period 1998-2005. The empirical results suggest that banks with market power tend to take on lower credit risk and have a lower probability of default. Capital requirements reduce risk in general, but for banks with market power this effect significantly weakens. Higher activity restrictions in combination with more market power reduce both credit risk and the risk of default, while official supervisory power has only a direct impact on bank risk.Banking sector reform, regulations, competition, risk-taking, CEE banks

Money never sleeps:Capital flows under global risk and uncertainty

We employ various indexes, namely the geopolitical risk (GPR) index, economic policy uncertainty (EPU) index, and world uncertainty index (WUI), to comprehensively capture multiple dimensions of risk and uncertainty and investigate their influence on capital flows measured by different categories of mutual fund flows and IMF intercountry transaction flows. We find that GPR harms aggregate capital flows of both equity and bond funds, whereas rising EPU only significantly reduces the capital flows of equity funds. Additionally, WUI increases capital flowing into active bond funds, indicating a flight-to-safety effect. Besides, high GPR environments amplify the negative influence of EPU on capital flows of equity funds. Meanwhile, in more geopolitically stable conditions, bond markets may serve as a preferred shelter for navigating EPU. However, we find that the impacts of risk and uncertainty on transaction flows are marginal. Furthermore, we demonstrate that global risk or uncertainty (EPU and WUI) plays a more dominant role than country-specific ones in shaping capital flows. Therefore, this study offers novel insights into how different dimensions of risk and uncertainty can shape capital flows differently and whether the compounding effect of risk and uncertainty differs from that of a single risk or uncertainty.</p

The effect of board size and composition on bank efficiency

This paper analyzes the relationship between board structure, in terms of board size and composition, and bank performance. Unlike previous studies, the present analysis is carried out within a stochastic frontier framework. To this end, bank performance is proxied by both cost and profit efficiency, measures that present considerable advantages over simple accounting ratios. The empirical framework formed is applied to a panel of large European banks operating during the period 2002-2006. We find that board size negatively affects banks’ cost and profit efficiency, while the impact of board composition on profit efficiency is non-linear. Finally, introducing risk-taking (credit risk) as an interaction component of board size and composition does not affect the robustness of the results

Regulations, competition and bank risk-taking in transition countries

This study investigates whether regulations have an independent effect on bank risk-taking or whether their effect is channeled through the market power possessed by banks. Given a well-established set of theoretical priors, the regulations considered are capital requirements, restrictions on bank activities and official supervisory power. We use data from the Central and Eastern European banking sectors over the period 1998-2005. The empirical results suggest that banks with market power tend to take on lower credit risk and have a lower probability of default. Capital requirements reduce risk in general, but for banks with market power this effect significantly weakens. Higher activity restrictions in combination with more market power reduce both credit risk and the risk of default, while official supervisory power has only a direct impact on bank risk

The effect of board size and composition on bank efficiency

This paper analyzes the relationship between board structure, in terms of board size and composition, and bank performance. Unlike previous studies, the present analysis is carried out within a stochastic frontier framework. To this end, bank performance is proxied by both cost and profit efficiency, measures that present considerable advantages over simple accounting ratios. The empirical framework formed is applied to a panel of large European banks operating during the period 2002-2006. We find that board size negatively affects banks’ cost and profit efficiency, while the impact of board composition on profit efficiency is non-linear. Finally, introducing risk-taking (credit risk) as an interaction component of board size and composition does not affect the robustness of the results

Regulations, competition and bank risk-taking in transition countries

This study investigates whether regulations have an independent effect on bank risk-taking or whether their effect is channeled through the market power possessed by banks. Given a well-established set of theoretical priors, the regulations considered are capital requirements, restrictions on bank activities and official supervisory power. We use data from the Central and Eastern European banking sectors over the period 1998-2005. The empirical results suggest that banks with market power tend to take on lower credit risk and have a lower probability of default. Capital requirements reduce risk in general, but for banks with market power this effect significantly weakens. Higher activity restrictions in combination with more market power reduce both credit risk and the risk of default, while official supervisory power has only a direct impact on bank risk

What drives acquisitions in the EU banking industry? The role of bank regulation and supervision framework, bank specific and market specific factors

We investigate the determinants of commercial bank acquisitions in the former fifteen countries of the European Union by evaluating the impact of bank-specific measures, such as size, growth and efficiency of banks, and external influences reflecting industry level differences in the regulatory and supervision framework, market environment and economic conditions. Our empirical analysis involves multinomial logit estimation at various levels in order to identify those characteristics that most consistently predict targets and acquirers from a sample of over 1400 commercial banks. The overall results indicate that, relative to banks that were not involved in the acquisitions, (i) targets and acquirers were significantly larger, less well capitalized and less cost efficient, (ii) targets were less profitable with lower growth prospects, and acquirers more profitable with higher growth prospects, (iii) external factors have affected targets and acquirers differently, and their effects have not been consistent or robust to sample size changes. © 2011 New York University Salomon Center and Wiley Periodicals, Inc.

Firms' sustainability, financial performance, and regulatory dynamics: Evidence from European firms

This study examines the association between firms’ ESG reputational risk and financial performance under the EU regulatory policy changes and the COVID-19 period. Analyzing a panel of 1,816 European listed firms during the period 2007-2021, we document evidence that firms with lower ESG reputational risk have reduced information asymmetry, are less financial constrained and perform better. To establish causality, we design a quasi-natural experiment focusing on the 2014/95/EU directive of non-financial disclosing and the COVID-19 exogenous shock. Our findings are robust to several estimation techniques that address endogeneity, self-selection, and model sensitivity