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

Yuri Biondi and Graeff Imke J. ()
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Graeff Imke J.: Allen and Overy, Hamburg, Germany

Accounting, Economics, and Law: A Convivium, 2024, vol. 14, issue 3, 395-429

Abstract: We analyse the effects of changes in regulatory capital requirements under Basel III on the dynamic evolution of bank shareholder equity over time. Evidence from managerial and regulatory reports shows that bank shareholder equity stands between micro-prudential regulatory capital requirements and managerial pursuit of equity economising strategies. Shareholder value strategies see shareholders as the equity investment remuneration recipients. Micro-prudential regulators, in turn, address them as equity investment providers. With opposing cash streams, one orientation puts the other to a test. The article 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 evidence-based financial analysis applies an innovative method to data directly extracted from financial statements, in order to measure this equity position evolution 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 (search for similar items in EconPapers)
JEL-codes: G20 G28 G30 G35 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1515/ael-2019-0083

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Accounting, Economics, and Law: A Convivium is currently edited by Reuven S. Avi-Yonah, Yuri Biondi and Shyam Sunder

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