Reverse Revolving Doors in the Supervision of European Banks

Abstract

We show that the presence of executive directors with prior experience in the finance industry is pervasive on the boards of European national banking supervisors. Up to one executive out of three has previously held positions in the industry he/she supervises. Appointments of such executives impacts more favorably bank valuations than those of executives without a finance background. The proximity to supervised banks---rather than superior financial expertise or intrinsic skills---appears to drive the positive differential effect of finance-related executives.

Keywords: Revolving Doors, Banking Supervision, Conflicts of Interest

JEL Classification: G14, G21, G28