Board Accountability and Risk Taking in Banking – Evidence from a Quasi-Experiment

Tobias Körner

German Council of Economic Experts

January 1, 2012

Ruhr Economic Paper No. 313

In this paper, a law reform is evaluated that aimed at improving the corporate governance of German savings banks by tightening accountability and legal liability of outside directors. The causal effect of this reform on bank risk is identified by difference-in-differences and triple differences strategies. The estimation results show that savings banks subject to the reform increased capital and liquidity ratios. Hence, they have become less vulnerable to unexpected losses and liquidity shocks. This indicates that the low occurrence of outside director litigation reflects incentive effects of current liability regimes.

Number of Pages in PDF File: 41

Keywords: Corporate governance, outside directors, legal liability, bank risk

JEL Classification: G21, G38, K20

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Date posted: February 1, 2012 ; Last revised: April 12, 2012

Suggested Citation

Körner, Tobias, Board Accountability and Risk Taking in Banking – Evidence from a Quasi-Experiment (January 1, 2012). Ruhr Economic Paper No. 313. Available at SSRN: http://ssrn.com/abstract=1996520 or http://dx.doi.org/10.2139/ssrn.1996520

Contact Information

Tobias Körner (Contact Author)
German Council of Economic Experts ( email )
Federal Statistical Office
Gustav-Stresemann-Ring 11
Wiesbaden, Hessen 65180
+49(0)611 75 28 86 (Phone)
Feedback to SSRN

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