Governance Mechanisms in Spanish Banks: Does Ownership Matter?

42 Pages Posted: 1 Apr 2003

See all articles by Rafel Crespí-Cladera

Rafel Crespí-Cladera

Universitat Illes Balears (UIB), Dep. Economia i Empresa

Miguel A. García-Cestona

Universitat Autonoma de Barcelona (UAB) - Department d'Economia de l'Empresa

Vicente Salas-Fumás

University of Zaragoza - Department of Business Administration and Organization

Date Written: June 2003

Abstract

This paper examines the governance of Spanish banks around two main issues. First, does poor economic performance activate governance interventions that favor the removal of executive directors and the merger of non-performing banks? And second, does the relationship between governance intervention and economic performance vary with the ownership form of the bank? We find a negative relationship between performance and governance intervention for banks, but the results change for each form of ownership and each type of intervention. Internal control mechanisms work for Independent Commercial banks, but Savings banks show weaker internal mechanisms of control and the only significant relationship between performance and governance intervention that appears is for mergers. The Spanish Savings banks, with a peculiar form of ownership that, in fact,implies a lack of ownership, give voice to several stakeholder groups with no clear allocation of property rights. Nevertheless, their economic performance is not generally affected. Product-market competition compensates for those weaker internal governance mechanisms and non-performing banks are not fully protected from disappearing.

Keywords: Corporate governance, commercial and savings banks, executive turnover, mergers and acquisitions

JEL Classification: G21, G34, G38

Suggested Citation

Crespi-Cladera, Rafel and García Cestona, Miguel Ángel and Salas-Fumás, Vicente, Governance Mechanisms in Spanish Banks: Does Ownership Matter? (June 2003). Available at SSRN: https://ssrn.com/abstract=380580 or http://dx.doi.org/10.2139/ssrn.380580

Rafel Crespi-Cladera (Contact Author)

Universitat Illes Balears (UIB), Dep. Economia i Empresa ( email )

Crta. de Valldemossa km 7, 5
07071 Palma Mallorca
Spain
+34 971 173273 (Phone)
+34 971 173426 (Fax)

Miguel Ángel García Cestona

Universitat Autonoma de Barcelona (UAB) - Department d'Economia de l'Empresa ( email )

Campus Bellaterra, Edifici B.
Bellaterra (Barcelona), 08193
Spain
+34 93 5812147 (Phone)
+34 93 5812555 (Fax)

Vicente Salas-Fumás

University of Zaragoza - Department of Business Administration and Organization ( email )

Dr. Cerrada 1
5005 Zaragoza
Spain
+34 976 761803 (Phone)

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