Shareholder Activism in Banking

79 Pages Posted: 18 Sep 2015

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: August 2015

Abstract

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

Roman, Raluca A., Shareholder Activism in Banking (August 2015). Federal Reserve Bank of Kansas City Working Paper No. 15-09. Available at SSRN: https://ssrn.com/abstract=2661747 or http://dx.doi.org/10.2139/ssrn.2661747

Raluca A. Roman (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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