Investor Activism Effects in Banking: Is Activism Beneficial for Bank Shareholders, Creditors, and the Public?

78 Pages Posted: 24 Sep 2014 Last revised: 9 Feb 2016

See all articles by Raluca A. Roman

Raluca A. Roman

Federal Reserve Bank of Philadelphia

Multiple version iconThere are 2 versions of this paper

Date Written: December 2015

Abstract

This paper conducts the first assessment of investor activism in banking and its effects on risk-taking and performance. It focuses on the conflicts among different bank stakeholders to understand whether activism is beneficial for these different parties. Using hand-collected data on shareholder activism, we find that activism is generally not a stabilizing force in banking, increasing bank risk-taking, but creating market value for shareholders, and leaving operating returns unaltered, consistent with the empirical dominance of the Shareholder-Creditor Conflict. However, activism is not a significant risk source during crises. From a public perspective, creditors (including the government in its role as a creditor) may lose during normal times, but not during crises.

Keywords: banking, shareholder activism, corporate governance, financial stability, financial crises

JEL Classification: G21, G28, G38, G01

Suggested Citation

Roman, Raluca A., Investor Activism Effects in Banking: Is Activism Beneficial for Bank Shareholders, Creditors, and the Public? (December 2015). Available at SSRN: https://ssrn.com/abstract=2500461 or http://dx.doi.org/10.2139/ssrn.2500461

Raluca A. Roman (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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