Shareholder Activism in Banking
79 Pages Posted: 18 Sep 2015
Date Written: August 2015
This paper conducts the first assessment of shareholder activism in banking and its effects on risk and performance. The focus is on the conflicts among bank shareholders, managers, and creditors (e.g., regulators, deposit insurer, taxpayers, depositors). This paper finds activism may generally be a destabilizing force, increasing bank risk-taking, but creating market value for shareholders, and leaving operating returns unchanged, consistent with the empirical dominance of the Shareholder-Creditor Conflict. However, during financial crises, the increase in risk disappears, suggesting activism risk incentives may be muted. From a public perspective, creditors (including the government) may lose during normal times, but not during financial crises.
Keywords: banking, shareholder activism, financial stability, financial crises
JEL Classification: G21, G28, G38, G01
Suggested Citation: Suggested Citation