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

Yuri Biondi and Imke Graeff
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Yuri Biondi: IRISSO - Institut de Recherche Interdisciplinaire en Sciences Sociales - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres
Imke Graeff: LABEX Refi - ESCP Europe - Ecole Supérieure de Commerce de Paris

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Abstract: 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.

Date: 2024-08-19
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Published in Accounting, Economics and Law: A convivium, 2024, 14 (3), pp.395-429. ⟨10.1515/ael-2019-0083⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04778109

DOI: 10.1515/ael-2019-0083

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