Subprime Crisis and Board (In)Competence: Private vs. Public Banks in Germany
University of Geneva - Geneva Finance Research Institute; Swiss Finance Institute; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Marcel P. Thum
Dresden University of Technology - Faculty of Economics and Business Management; CESifo (Center for Economic Studies and Ifo Institute for Economic Research) - Ifo Institute for Economic Research
June 21, 2010
INSEAD Working Paper No. 2010/45/FIN
We examine evidence for a systematic underperformance of Germany's state-owned banks in the current financial crisis and study if the bank losses can be traced to the quality of bank governance. For this purpose, we examine the biographical background of 593 supervisory board members in the 29 largest banks and find a pronounced difference in the finance and management experience of board representatives across private and state-owned banks. Measures of "boardroom competence" are then related directly to the magnitude of bank losses in the recent financial crisis. Our data confirms that supervisory board (in)competence in finance is related to losses in the financial crisis. Improved bank governance is therefore a suitable policy objective to reduce bank fragility.
Number of Pages in PDF File: 35
Keywords: Governance, Supervisory Boards, Banking, Financial Crisis
JEL Classification: G2, G21, G3, G32working papers series
Date posted: June 21, 2010
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