Governance mechanisms in Spanish banks. Does ownership matter?

Rafel Crespí, Miguel A. García-Cestona, Vicente Salas

    Research output: Contribution to journalArticleResearchpeer-review

    77 Citations (Scopus)

    Abstract

    This paper examines the governance of Spanish banks regarding two main issues. First, does poor economic performance activate governance interventions that favor the removal of executive directors and the merger of non-performing banks? And, second, does the relationship between governance intervention and economic performance vary with the ownership form of the bank? We find a negative relationship between performance and governance intervention for banks, but the results change for each form of ownership and each type of intervention. Internal-control mechanisms work for Independent Commercial banks, but Savings banks show weaker internal mechanisms of control and the only significant relationship between performance and governance intervention that appears is for mergers. The Spanish Savings banks, with a peculiar form of ownership that, in fact, implies a lack of ownership, give voice to several stakeholder groups with no clear allocation of property rights. Nevertheless, their economic performance is not generally affected. Product-market competition compensates for those weaker internal governance mechanisms, and non-performing banks are not fully protected from disappearing. © 2003 Elsevier B.V. All rights reserved.
    Original languageEnglish
    Pages (from-to)2311-2330
    JournalJournal of Banking and Finance
    Volume28
    Issue number10
    DOIs
    Publication statusPublished - 1 Oct 2004

    Keywords

    • Commercial and savings banks
    • Corporate governance
    • Executive turnover
    • Mergers and acquisitions

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