Management insulation and bank failures

Daniel Ferreira, David Kershaw, Tom Kirchmaier () and Edmund Schuster

Journal of Financial Intermediation, 2021, vol. 47, issue C

Abstract: How does management insulation from shareholder pressure influence banks’ resilience to crises? To address this question, we develop a measure of management insulation based on legal provisions. Unlike the existing alternatives, our measure considers the interactions between different provisions. We use this measure to study the relationship between management insulation and bank failure during the 2007–09 financial crisis. We find that banks in which managers were more insulated from shareholders in 2003 were less likely to be both bailed out in 2008/09 and targeted by activist shareholders. By contrast, alternative measures of management insulation fail to predict both bailouts and shareholder activism.

Keywords: Management Insulation; Bank Performance; Corporate Governance; Financial Crisis (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (7)

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Working Paper: Management insulation and bank failures (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:47:y:2021:i:c:s1042957321000103

DOI: 10.1016/j.jfi.2021.100909

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