Subprime Crisis and Board (In-)Competence: Private vs. Public Banks in Germany

39 Pages Posted: 17 Mar 2009

See all articles by Harald Hau

Harald Hau

University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Marcel P. Thum

Dresden University of Technology - Faculty of Economics and Business Management; CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute; Institute for Corruption Studies

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Date Written: March 13, 2009

Abstract

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.

Keywords: Governance, Supervisory Boards, Banking, Financial Crisis

JEL Classification: G2, G21, G3, G32

Suggested Citation

Hau, Harald and Thum, Marcel, Subprime Crisis and Board (In-)Competence: Private vs. Public Banks in Germany (March 13, 2009). CESifo Working Paper Series No. 2640, ECGI - Finance Working Paper No. 247/2009, Available at SSRN: https://ssrn.com/abstract=1360698

Harald Hau

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland

Swiss Finance Institute

Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Marcel Thum (Contact Author)

Dresden University of Technology - Faculty of Economics and Business Management ( email )

Mommsenstrasse 13
Dresden, D-01062
Germany

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

Institute for Corruption Studies

Stevenson Hall 425
Normal, IL 61790-4200
United States

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