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Size, Risk, and Governance in European Banking$
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Jens Hagendorff, Kevin Keasey, and Francesco Vallascas

Print publication date: 2013

Print ISBN-13: 9780199694891

Published to Oxford Scholarship Online: January 2014

DOI: 10.1093/acprof:oso/9780199694891.001.0001

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Board Monitoring, Regulation, and Performance in the European Banking Industry

Board Monitoring, Regulation, and Performance in the European Banking Industry

Chapter:
(p.134) (p.135) Chapter 6 Board Monitoring, Regulation, and Performance in the European Banking Industry
Source:
Size, Risk, and Governance in European Banking
Author(s):

Jens Hagendorff

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199694891.003.0006

This chapter examines how the interaction between bank-level monitoring and regulatory regimes influences the announcement period returns of acquiring banks in the US and twelve European economies. We study three board monitoring mechanisms (independence, CEO-chair duality and diversity) and analyze their effectiveness in preventing underperforming merger strategies under bank regulators of varying strictness. Only under strict banking regulation regimes, do board independence and diversity improve acquisition performance. In less strict regulatory environments, corporate governance is virtually irrelevant in improving the performance outcomes of merger activities. The results presented in the chapter indicate a complementary relationship between monitoring by boards and bank regulation and suggest that attempts to improve the ability of bank boards to critically assess managerial initiatives are most likely to be successful if internal governance is accompanied by strict industry regulation.

Keywords:   Bank Governance, Regulation, Bank Consolidation

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