Full Record

New Search | Similar Records

Author
Title Three Essays in Banking: Corporate Governance, Internationalization, and Government Bailouts
URL
Publication Date
Degree PhD
Discipline/Department Moore School of Business
Degree Level doctoral
University/Publisher University of South Carolina
Abstract This dissertation extends a growing literature on banking and finance by investigating bank corporate governance, internationalization, and bailouts. The first essay conducts the first assessment of shareholder activism in banking and its effects on risk and performance. Activism can create value and be an effective monitoring mechanism for banks, but it may also be a destabilizing mechanism, as maximizing shareholder value may cause financial instability. We focus on the conflicts among bank shareholders, managers, and creditors (e.g., regulators, deposit insurers, taxpayers, depositors). We find activism may generally be a destabilizing force, increasing bank risk-taking, but creating market value for shareholders, and leaving operating returns unchanged. This is consistent with the empirical dominance of the Shareholder-Creditor Conflict, which predicts that activist shareholders may induce managers to take higher risk to increase returns at the expense of creditors, given creditors’ difficulty in monitoring and regulatory-induced incentives. However, during financial crises, the increase in risk vanishes, suggesting activism may not be a major cause of risk during such times. From a public perspective, creditors (including the government) may lose during normal times, but not during crises. In the second essay (co-authored with Allen N. Berger, Sadok El Ghoul, and Omrane Guedhami), we document a positive relation between internationalization and bank risk. This is consistent with the empirical dominance of the market risk hypothesis – whereby internationalization increases banks’ risk due to market-specific factors in foreign vii markets – over the diversification hypothesis – whereby internationalization allows banks to reduce risk through diversification of their operations. The results continue to hold following a variety of robustness tests, including endogeneity and sample selection bias. We also find that the magnitude of this effect is more pronounced during financial crises. The results appear to be at least partially explained by agency problems related to poor corporate governance. These findings suggest that authorities might consider internationalization as an additional factor in bank supervision and regulation. In the third essay (co-authored with Allen N. Berger), we investigate whether the U.S. government bailout of banks during the recent financial crisis, the Troubled Assets Relief Program (TARP), gave recipients competitive advantages. Using a difference-indifference (DID) approach, we find that: 1) TARP recipients received competitive advantages and increased both their market shares and market power; 2) results may be driven primarily by the safety channel – TARP banks may be perceived as safer, which is partially offset by the cost disadvantage channel – TARP funds may be relatively expensive; and 3) these competitive advantages are primarily or entirely due to TARP banks that repaid early. The results of this paper may help explain other findings in the literature on TARP and yield…
Subjects/Keywords Business; Business Administration, Management, and Operations; banking; finance; bank corporate governance; internationalization; bailouts
Contributors Allen N. Berger
Rights Open Access Dissertation
Country of Publication us
Record ID oai:scholarcommons.sc.edu:etd-4106
Repository south-carolina
Date Retrieved
Date Indexed 2018-11-21
Created Date 2015-01-01 08:00:00

Sample Search Hits | Sample Images

…Financial Crises………………141 Table 3.12: Role of Corporate Governance for the Impact of Internationalization on Bank Risk………………………………………………………………………….…..……...142 Table 4.1: Definitions and Summary Statistics……………………………………........193 Table 4.2: Effects of TARP…

…186 Figure 4.2: The Dynamic Impacts of TARP on Bank Market Share and Market Power…………………………………………………..……………………………….189 xiii CHAPTER 1 INTRODUCTION This dissertation proposal investigates corporate governance, internationalization, and government…

…Armour and Gordon (2014)). Banking research indicates that corporate governance impacts bank risk and performance (e.g., Caprio, Laeven, and Levine (2007), Adams and Mehran (2005), Laeven and Levine (2009)…

…perspective, creditors (including the government) may lose during normal times, but not during financial crises. We also add to the debate in the literature on the role of bank governance around financial crises and show that at least one corporate

…them different from nonfinancials and can impact their corporate governance and the economy at large. First, bank 3 This is consistent with Beltratti and Stultz (2010), which document that poor bank governance (e.g., lower shareholder…

…x28;2014) document that loan spreads increase when activism relies on the market for corporate control, while loan spreads decrease when agency problems are addressed. Our paper is also related to the literature on bank governance and its effects on…

…sample selection bias. We also find that the magnitude of this effect is more pronounced during financial crises. The results appear to be at least partially explained by agency problems related to poor corporate governance. These findings suggest that…

…bailouts in banking. The robust findings of three essays add to the banking and corporate finance literatures. The first essay in Chapter 2 is the first empirical study to test shareholder activism as a channel of external corporate governance in banking…

.