Bank CEO ownership, performance and risk

• Autor(a) principal: Monteiro, Joana Margarida Vinhas Pires Ferreira
• Data de Publicação: 2022
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.14/41422
• topic: CEO ownership; Corporate governance; Principal-agent theory; Bank performance; Bank risk; Stock returns; Return on equity; ROE; Return on assets; ROA; Stock volatility; Risk weighted assets; Ratio of RWA to total assets; Financial crisis; Participação accionista; Governo societário; Problema de agência; Performance; Risco; Retorno das acções; Rentabilidade dos capitais próprios; Volatilidade das acções; Rentabilidade dos activos; Rácio de activos ponderados por risco sobre activos totais; RWA; Crise financeira; Domínio/Área Científica::Ciências Sociais::Economia e Gestão

In this study, I investigate the relationship between the Chief Executive Officer (CEO) ownership and the bank’s performance and risk, analysing the interaction between ownership and three measures of performance (stock returns, Return on Equity - ROE and Return on Assets - ROA) and two measures of risk (stock volatility and the ratio of Risk Weighted Assets RWA to Total Assets). I use a sample of a maximum of 47 listed US banks in 2021. Corporate governance of banks gained an increased interest after the financial crisis of 2008-2009, as governments, regulators, companies and academics tried to find good governance practices that could avoid another financial crisis. The principal-agent issue in banks has its own particularities, as banks are special companies due to their systemic risk, the presence of heavy regulation, and other factors that interact together to influence the optimal governance mechanism that would need to be implemented. One of the classical recommendations of governance is aligning the incentives of managers with the ones of the shareholders through equity ownership, ensuring a positive impact on performance and a prudent risk level for the bank. In this research, however, I found mixed evidence of this relationship with performance and no evidence with risk. I obtained limited results of a linear interaction with stock returns or ROE. I discovered significant results for a positive quadratic relationship between ownership and stock returns, but not for ROE or ROA. Nevertheless, there is some evidence of a significant, positive and linear influence on ROA.