Between Prudential Regulation and Shareholder Value: An Empirical Perspective on Bank Shareholder Equity (2001-2017)

Accounting, Economics and Law Research Network Conference, SASE 2018 Annual Meeting, Kyoto, Japan, 24 June 2018

39 Pages Posted: 7 Dec 2018 Last revised: 13 Mar 2019

See all articles by Yuri Biondi

Yuri Biondi

French National Center for Scientific Research (CNRS)

Imke Graeff

Labex ReFi; ESCP Europe

Date Written: March 11, 2019

Abstract

We analyse the effects of changes in regulatory capital requirements under Basel III on the dynamics of bank shareholder equity. Evidence from managerial and regulatory reports shows that bank shareholder equity stands between Basel III regulatory capital requirements and managerial pursuit of equity economising strategies. Shareholder value strategies see shareholders as the equity investment remuneration recipients. Regulators, in turn, address them as equity investment providers. With opposing cash streams, one concept put the other to a test. The paper visualises this conflict by analysing the actual shareholder contribution to the bank equity position in nine case studies of European financial institutions between 2001 and 2017; our empirical financial analysis applies an innovative method to data extracted from financial statements, to measure these equity position evolutions and assess bank equity dynamics in light of revised regulatory capital requirements and persistent assurance of shareholder value thriving in managerial reports. The choice of in-depth analysis of a sample of relevant case studies overcomes the absence of detailed data on changes in bank equity in existing databases.

Keywords: Financial institutions, Shareholder equity, Basel III/IV, Shareholder value, Regulatory capital requirements, prudential regulation, financialisation, bank corporate governance

JEL Classification: G35, G20, G30, G28, G21, G28, G34, G35, G38, M41, D83

Suggested Citation

Biondi, Yuri and Graeff, Imke, Between Prudential Regulation and Shareholder Value: An Empirical Perspective on Bank Shareholder Equity (2001-2017) (March 11, 2019). Accounting, Economics and Law Research Network Conference, SASE 2018 Annual Meeting, Kyoto, Japan, 24 June 2018. Available at SSRN: https://ssrn.com/abstract=3282773 or http://dx.doi.org/10.2139/ssrn.3282773

Yuri Biondi (Contact Author)

French National Center for Scientific Research (CNRS) ( email )

IRISSO - University Paris Dauphine PSL
Place Marechal Lattre Tassigny
75016 Paris
France

HOME PAGE: http://yuri.biondi.free.fr/

Imke Graeff

Labex ReFi ( email )

79 avenue de la République
Paris, 75011
France

ESCP Europe ( email )

79, avenue de la République
Paris, 75011
France

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