Neglecting Peter to Fix Paul: How Shared Directors Transmit Bank Shocks to Nonfinancial Firms
We trace a corporate governance channel of bank shock transmission into the real economy. Using 1,245 U.S. bank enforcement actions (EAs) issued between 1990 and 2017, we show that when a nonfinancial firm (NFF) and bank share a common director, NFF stock prices fall around bank EAs. Severe EAs elic...
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| Veröffentlicht in: | Journal of financial and quantitative analysis 2021-09, Vol.56 (6), p.2170-2207 |
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| container_title | Journal of financial and quantitative analysis |
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| creator | Pugachev, Leonid Schertler, Andrea |
| description | We trace a corporate governance channel of bank shock transmission into the real economy. Using 1,245 U.S. bank enforcement actions (EAs) issued between 1990 and 2017, we show that when a nonfinancial firm (NFF) and bank share a common director, NFF stock prices fall around bank EAs. Severe EAs elicit more negative returns. During enforcement, valued directors substitute NFF board meeting attendance with bank board meeting attendance. Impaired credit relationships, director reputational damage, and endogenous director selection cannot fully explain our results. These findings imply that shared directors could transmit larger bank shocks into the real economy. |
| doi_str_mv | 10.1017/S0022109020000587 |
| format | Article |
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| ispartof | Journal of financial and quantitative analysis, 2021-09, Vol.56 (6), p.2170-2207 |
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| language | eng |
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| source | Business Source Complete; Cambridge Journals |
| subjects | 1990-2017 Attendance Banking industry Bankinsolvenz Banks Boards of directors Corporate Governance Directors Endogenous Enforcement Führungskräfte Prices Regulatory reform Reputation Shares Spillover-Effekt Stock prices USA |
| title | Neglecting Peter to Fix Paul: How Shared Directors Transmit Bank Shocks to Nonfinancial Firms |
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