Matthias Köhler

Bank owners or bank managers: who is keen on risk? Evidence from the financial crisis

In this paper, we analyse whether bank owners or bank managers were the driving force behind the risks incurred in the wake of the financial crisis of 2007/2008. We show that owner controlled banks had higher profits in the years before the crisis, and incurred larger losses and were more likely to require government assistance during the crisis compared to manager-controlled banks. The results are robust to controlling for a wide variety of bank specific, country specific, regulatory and legal variables. Regulation does not seem to mitigate risk taking by bank owners. We find no evidence that profit smoothing drives our findings. The results suggest that privately optimal contracts aligning the incentives of management and shareholders may not be socially optimal in banks.

Corporate governance and current regulation in the German banking sector: an overview and assessment

This paper gives an overview over corporate governance and banking regulation in Germany. Particular attention is put on legal and regulatory changes that were made in response to the financial market crisis. The paper shows that the changes mainly focus on the remuneration of managers and on further professionalizing the supervisory board. Problematic is that several laws that were enacted in the past years to improve corporate governance focus on listed firms. Furthermore, some of the recommendations and suggestions made to improve corporate governance in Germany are not legally binding even for stock corporations. Recent empirical evidence, moreover, suggests that bank shareholders pushed for greater risk-taking and not managers. This contrast with public view that the bank managers are pushed by aggressive remunerations schemes to increase risk-taking and indicates that the recent legal and regulatory changes fail to remove all weaknesses of the German corporate governance system.

International Capital Mobility and Current Account Targeting in Central and Eastern European Countries

The paper examines the degree of financial integration in five central and eastern European economies on the basis of saving-investment correlations. A comparison with eleven member states of the European monetary union shows that the countries under review have already reached a higher degree of integration in quantitative terms. Since this approach is sensitive to current account targeting policies, the paper uses econometric techniques to control for these kinds of policies revealing that the central and eastern European countries that suffered from current account crises in the past used policies to balance the current account.

Blockholdings and Corporate Governance in the EU Banking Sector

Ownership structures widely differ across the EU. While large blockholdings dominate in the banking sector in Continental Europe, ownership is widely dispersed in the United Kingdom. These differences have consequences for corporate governance in the EU banking sector. This paper analyzes the efficiency of shareholder control and hostile takeovers as corporate governance mechanisms in the EU banking sector against the background of the regulatory environment and differences in the ownership structure of banks. Particular attention is put on current trends in the ownership structure of banks (e. g. sovereign wealth funds). The paper is based on a new dataset on shareholdings in listed banks in the EU banking sector. The results indicate that EU regulations have not always improved corporate governance in the banking sector. While shareholder control has been improved by a better protection of minority shareholder rights, the efficiency of the takeover market has been reduced in Continental Europe.