Management insulation and bank failures

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

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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; Law and Financial Markets Project (search for similar items in EconPapers)
JEL-codes: F3 G3 J50 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2021-07-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Journal of Financial Intermediation, 1, July, 2021, 47. ISSN: 1042-9573

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http://eprints.lse.ac.uk/110428/ Open access version. (application/pdf)

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Journal Article: Management insulation and bank failures (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:110428

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