Was the Crisis Due to a Shift from Stakeholder to Shareholder Finance? Surveying the Debate

33 Pages Posted: 18 Apr 2015

Date Written: April 15, 2015

Abstract

We discuss the literature on the shift from stakeholder to shareholder finance behind the Great Financial Crisis (GFC). Traditional banks generally maximized stakeholder value (STV). But before the GFC also many of them started maximizing shareholder value (SHV). Moving from STV to SHV often meant shifting credit management from Originate-to-Hold (OTH) to Originate-to-Distribute (OTD). Moving from STV-OTH to SHV-OTD increased systemic risk damaging the common good of financial stability. STV-oriented banks seemed to weather the GFC relatively better with more heterogeneous systems proving more resilient. Heterogeneity in banking governance-orientations/ownership-structures seems to add value reducing the probability of financial crises.

Keywords: Financial and Banking Crises; Bank Governance; Financial Regulation; Financial Institutions and Organizations

JEL Classification: G0; G01; G14; G15; G18; G21; G20; G24; G28; G30; G32

Suggested Citation

Ferri, Giovanni and Leogrande, Angelo, Was the Crisis Due to a Shift from Stakeholder to Shareholder Finance? Surveying the Debate (April 15, 2015). Euricse Working Papers, 76 | 15. Available at SSRN: https://ssrn.com/abstract=2594265 or http://dx.doi.org/10.2139/ssrn.2594265

Giovanni Ferri (Contact Author)

LUMSA University ( email )

Via della Traspontina
Roma, Rome 00192
Italy

HOME PAGE: http://www.lumsa.it/giovanni-ferri

No contact information is available for Angelo Leogrande

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