Paola Schwizer

The impact of corporate governance press news on stock market returns

Stock market prices reflect information regarding firms business environments, operations and, in general, their fundamentals. Recently, various studies have analysed the link between news coverage and stock prices but no evidence exists on how channels and ways of communication of information affect investors behaviour. We analyses these aspects focussing on a large sample of corporate governance news published between 2003 and 2007 in Il Sole 24 Ore, Italys major financial newspaper. We show that before news is made public investors are only able to assess the type of corporate governance event underlying it. After publication, investors are influenced by the content (positive or negative) and the tone of communication (strong or weak) of the news.

The Role of the Public Sector

Small and medium-sized enterprises (SMEs) play an essential role in the economy internationally and above all in Europe, where over 20 million SMEs account for around two-thirds of jobs and half of turnover in the non-agricultural business sectors. SMEs’ contribution to growth and employment, not to mention innovation, makes them key players in the achievement of the Lisbon Strategy goals (European Investment Bank, 2005). At the same time, restrictions on SMEs’ access to external finance create undesirable obstacles to employment and growth.

Assessing effectiveness and compliance of banking boards

Purpose - This paper aims to develop a model to assess the effectiveness and compliance of bank boards, taking into account their unique characteristics, financial industry standards and regulations. Design/methodology/approach - The literature on the roles and effectiveness of boards and directors in the financial industry is reviewed. Findings - The main finding in the literature suggests that evaluating the effectiveness of a board must include characteristics of the entire board as well as individual contributions of directors. Practical implications - Banking boards, more than in the past, must proactively evaluate their effectiveness and compliance with existing rules. Originality/value - The paper proposes a model for assessing the effectiveness and compliance of boards and directors of banking organizations, considering their characteristics, financial industry standards and regulations.

The “day after” Basel 2: do regulators comply with banking culture?

Purpose - The purpose of this paper is to measure the cultural fit between supervisory authorities and banks, considering cultural gaps as possible stumbling blocks for effective supervision. Design/methodology/approach - The paper uses a text-analysis approach. The methodological assumption is that the analysis of culture is closely connected to the analysis of the type of language used by the members of an organization. To this aim, a cultural survey was developed in order to compare cultures of Bank of Italy, Italian banks, and Basel Committee during the years 1999 and 2004. Findings - The results highlight several significant, but decreasing, cultural gaps relating to important issues for banks, such as risk, disclosure, change, and innovation. Practical implications - The evidence and the measurement of cultural gaps are useful elements for the identification of change actions by supervisors and banks. In fact, identified gaps could be detrimental for an effective supervision and could be a source of regulatory risk for regulated banks. Originality/value - This paper focuses on an evolutionary aspect of text analysis, concerning standardization in the treatment of data, combined with the use of standard vocabularies. This allows a greater comparability of the output of the various studies, enabling us to further refine the methodology. The analysis model includes the definition of several concepts – such as “risk” and “disclosure” – at the base of the development of banking culture and representing basic goals of prudential regulation.

Corporate Culture and Shareholder Value in Banking Industry

This paper analyses the casual relationship between corporate culture and shareholder value using a sample of large banks in the French, German, Italian and U.K. banking systems over the 2000 to 2003 period. Firstly, we measure shareholder value using an Economic Value Added estimated through a procedure tailored to account for banking peculiarities. Secondly, we measure corporate culture using language as its particular artifact and developing a cultural survey based on the application of a text-analysis model to a corpus of reference texts produced by the sample of banks. We posit six hypotheses regarding the relationship between corporate culture and bank profits and shareholder value. Our results noticeably show that bank profits and shareholder value benefit from different orientations of banking corporate culture.

M&A and Post Merger Integration in Banking Industry: The Missing Link of Corporate Culture

The intense concentration process taking place in the financial systems of the major countries has attracted substantial attention from stakeholders and academics. The impact of M&A on value creation and efficiency / effectiveness improvements of banks involved appears, on the whole, disappointing and still hard to create benefits for customers. The reason seems to lie in the difficulty of governing a post-merger integration process, which generally requires good governance and management practices, significant experience and attention to cultural profiles and individuals’ behavior. More in detail, management literature recognizes the importance of corporate culture, considered as the set of values and decisions that drive individuals’ behaviors within organizations, for explaining alliance success in M&A operations. In fact cultural clashes could determine conflicts and negative effects, on one hand, on the timing and the effectiveness of the post-merger integration process and, on the other hand, on motivation and turnover of individuals. Set in Italian banking industry, this paper proposes a framework, applied to a representative sample of cases (about 78,2% of market share, based on total assets), for assessing cultural similarity of actors involved in M&A operations. Corporate culture is measured using an ethnographic approach focusing on language as its special artifact. The assessment is based on the definition of some key concepts that are relevant for the banking industry (e.g., competencies, competition, customer, disclosure, human resources, innovation, risk) and on a text-analysis model applied to a corpus of reference texts produced by the surveyed banks three years before M&A. The elaboration of data uses Wordsmith 4, a text analysis software developed by Oxford University. The paper is organized as follows: at first, we analyze and explain how low levels of cultural compatibility before M&A could limit the success of post-merger integration processes of banks. After, we propose and describe the measurement procedure of the cultural fit among bidder and target banks, based on text analysis. Lastly, we conclude with the discussion of the results obtained for each couple of banks involved in M&A and with suggestions for future applications of our framework.

Managing compliance risk after MiFID

The research focuses on changes in the compliance function within major European banks and other financial intermediaries and on the effects of MiFID implementation. The research: a) focuses on multinational groups based in Europe and operating in investment services, such as banks, asset management companies and investment companies; b) highlights the critical areas in terms of compliance after MiFID implementation within international groups, with growing operational complexity in a framework of principle-based regulation. The four areas of research seek to answer the following questions: 1) Is the positioning of the compliance function “at the top�? of the organizational structure, as suggested by the Basel Committee? 2) Are the roles attributed to the compliance function, their knowledge and their instruments consistent with their responsibilities? 3) Do the methodologies applied in investment services for measuring and mitigating compliance risk follow a qualitative and/or a quantitative approach? 4) Is the interaction between the compliance function inside and outside the structure appropriate to the goals of compliance? Thirty-one top international groups based in Europe were invited to take part in the research. Sixteen of them accepted. The research was carried out using a structured questionnaire and the qualitative analysis of public reports. Due to the sample size, this analysis can only be considered indicative, but ‘knowing what is actually happening’ is essentially to avoid subjectivity and support action, providing ideas for organizing systems, designing paradigms and thus facilitating efficient, effective and consistent approaches to self-regulation and to implementing external regulations.

Cooperative banking in Europe: case studies

List of Illustrations Preface About the Authors Introduction A.Carretta, P.Schwizer & V.Boscia PART I: CO-OPERATIVE BANKING IN THE WESTERN EU-COUNTRIES The Banking System in Portugal: The Case of Credito Agricola Mutuo Group V.Stefanelli The Cooperative Banking System in Spain V.Stefanelli The Cooperative Banking System in France P.Marchetti & A.Sabetta The Peculiarity of the UK Case: The Mutual Building Societies V.Stefanelli Cooperative Banking in the Netherlands: Rabobank Network M.Cotugno The German Cooperative Banking System: Volksbanken and Raiffeisenbanken M.Biasin The Cooperative Credit System in Italy R.Di Salvo The Credit Cooperative System in Finland R.Di Salvo, J.S.Lopez & I.Schraffl PART II: CO-OPERATIVE BANKING IN THE NEW EU-COUNTRIES Cooperative Banking in the Newly European Countries M.Cotugno Credit Cooperatives in Romania C.Bussoli The Bulgarian Cooperative Banking M.Cotugno CONCLUSIONS Concluding Remarks A.Carretta , P.Schwizer & V.Boscia Notes References Index

Managing Factoring in Banking Groups

On the market for factoring services independent suppliers coexhist with companies affiliated with banking groups. The last ones can be oriented in their decision processes by the policies of their parent company, usually a bank. They could also benefit from synergies among the different units of the group. The main benefits are linked to cost reduction, better skill-based resources allocation and a higher amount of financial coverage. If such interdependencies are found and developed, factors belonging to banking groups could attain a competitive advantage towards independent intermediaries. To assess the impact of the group structure we have to evaluate the degree of substitutability between factoring and other financial services supplied by the group, the synergy effects that could arise in each step of the production and delivery processes and eventually organizational challenges faced by the group. In our analysis we find evidence of complementarity among factoring and other financial products, we consider the possibile sinergies in some steps of the production process and we propose a methodology to assess the level of group cohesion and the kind of control exercised by the parent company.

Risk Culture in the Regulation and Supervision Framework

Risk culture deserved increasing attention by regulators and supervisors in recent times, along with the awareness that weaknesses in risk culture were at the base of the global financial crisis and misconduct of many financial institutions. This Chapter focuses on how regulation affects bank risk culture and risk-taking behaviors and how this has an influence on supervisory styles.