The impact of foreign owership and board membership on the performance of domestic banks: evidence from Portugal
Autor(a) principal: | |
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Data de Publicação: | 2006 |
Tipo de documento: | Dissertação |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10071/1400 |
Resumo: | This study examines the effect of foreign ownership and board membership on the performance of domestic banks in Portugal, employing ordinary least-square and two-stage least-square regression analysis. The findings reveal a negative relationship between foreign ownership and bank costs. Foreign ownership implies a reduction in total costs of 4.1% while operating costs decline 1.1%. For each unit of foreign equity total costs go down 11.7% and operational costs fall 3.4%. Evidence also indicates that foreign board members introduce improvements in organizational structure and operational efficiency, according to the significant and negative relationship with operating costs. Furthermore, our results suggest that domestic banks’ dependence on traditional banking areas of business is reduced due to foreign board members’ experienced insights and understanding of markets and competition beyond the local environment. Foreign board membership reduces the interest margin on average 0.7% and increases the non-interest margin 0.4%. A 1% increase in the number of foreign board members reduces the net interest margin by 2.9%. A CEO with foreign nationality lowers the interest margin by 6.0%. Additionally, foreign directors with major influence on the board seem to be more willing to address the deterioration of asset quality by promoting the adoption of more prudent practices in lending and management of credit risk, which leads to higher levels of provisions for credit losses. These findings indicate that foreign ownership and board membership can play an important role in importing sophisticated managerial practices that can improve the performance of domestic banks. Indeed, the adoption of a global corporate governance system can improve bank performance, especially in countries in their early stages of financial development. |
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The impact of foreign owership and board membership on the performance of domestic banks: evidence from PortugalForeign ownershipBoard ownershipCorporate governanceThis study examines the effect of foreign ownership and board membership on the performance of domestic banks in Portugal, employing ordinary least-square and two-stage least-square regression analysis. The findings reveal a negative relationship between foreign ownership and bank costs. Foreign ownership implies a reduction in total costs of 4.1% while operating costs decline 1.1%. For each unit of foreign equity total costs go down 11.7% and operational costs fall 3.4%. Evidence also indicates that foreign board members introduce improvements in organizational structure and operational efficiency, according to the significant and negative relationship with operating costs. Furthermore, our results suggest that domestic banks’ dependence on traditional banking areas of business is reduced due to foreign board members’ experienced insights and understanding of markets and competition beyond the local environment. Foreign board membership reduces the interest margin on average 0.7% and increases the non-interest margin 0.4%. A 1% increase in the number of foreign board members reduces the net interest margin by 2.9%. A CEO with foreign nationality lowers the interest margin by 6.0%. Additionally, foreign directors with major influence on the board seem to be more willing to address the deterioration of asset quality by promoting the adoption of more prudent practices in lending and management of credit risk, which leads to higher levels of provisions for credit losses. These findings indicate that foreign ownership and board membership can play an important role in importing sophisticated managerial practices that can improve the performance of domestic banks. Indeed, the adoption of a global corporate governance system can improve bank performance, especially in countries in their early stages of financial development.A presente tese analisa a influência que os accionistas e administradores estrangeiros exercem na performance dos bancos domésticos em Portugal, utilizando para o efeito os métodos OLS (Ordinary Least-Square) e 2SLS (Two-Stage Least-Square). Os resultados revelam uma relação negativa entre os accionistas estrangeiros e os custos dos bancos domésticos, traduzindo-se a presença daqueles numa redução dos custos totais e dos custos operacionais de, respectivamente, 4.1% e 1.1%. O estudo realizado sugere igualmente que a existência de membros estrangeiros nos conselhos de administração introduz melhorias na estrutura organizacional e na eficiência operacional dos bancos domésticos (tendo em conta a relação significativa e negativa com os custos operacionais) e reduz a dependência destes em relação às actividades bancárias tradicionais, na medida em que os administradores estrangeiros possuem conhecimentos que vão para além do mercado e da concorrência local na área de negócio em causa (as regressões evidenciam que a presença dos referidos administradores provoca uma diminuição da margem financeira de 0.7% e um aumento da margem não financeira de 0.4%). Por outro lado, quando os membros com maior peso no conselho de administração (presidente e vice-presidentes) são estrangeiros parece existir uma maior disposição para lidar com o problema da deterioração da qualidade dos activos, a qual se concretiza na adopção de práticas mais prudentes na concessão de empréstimos e na gestão do risco de crédito, resultando tal, por sua vez, em níveis de provisionamento mais elevados. Por conseguinte, a análise empírica efectuada indica que os accionistas e administradores estrangeiros podem desempenhar um papel importante na “importação” de práticas de gestão mais sofisticadas, as quais tendem a melhorar a performance dos bancos domésticos.2009-04-13T15:19:02Z2007-01-01T00:00:00Z20072006-09info:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/masterThesisapplication/pdfapplication/octet-streamhttp://hdl.handle.net/10071/1400engGuerreiro, Luís Miguel Piresinfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-11-09T17:29:34Zoai:repositorio.iscte-iul.pt:10071/1400Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T22:13:13.711865Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
The impact of foreign owership and board membership on the performance of domestic banks: evidence from Portugal |
title |
The impact of foreign owership and board membership on the performance of domestic banks: evidence from Portugal |
spellingShingle |
The impact of foreign owership and board membership on the performance of domestic banks: evidence from Portugal Guerreiro, Luís Miguel Pires Foreign ownership Board ownership Corporate governance |
title_short |
The impact of foreign owership and board membership on the performance of domestic banks: evidence from Portugal |
title_full |
The impact of foreign owership and board membership on the performance of domestic banks: evidence from Portugal |
title_fullStr |
The impact of foreign owership and board membership on the performance of domestic banks: evidence from Portugal |
title_full_unstemmed |
The impact of foreign owership and board membership on the performance of domestic banks: evidence from Portugal |
title_sort |
The impact of foreign owership and board membership on the performance of domestic banks: evidence from Portugal |
author |
Guerreiro, Luís Miguel Pires |
author_facet |
Guerreiro, Luís Miguel Pires |
author_role |
author |
dc.contributor.author.fl_str_mv |
Guerreiro, Luís Miguel Pires |
dc.subject.por.fl_str_mv |
Foreign ownership Board ownership Corporate governance |
topic |
Foreign ownership Board ownership Corporate governance |
description |
This study examines the effect of foreign ownership and board membership on the performance of domestic banks in Portugal, employing ordinary least-square and two-stage least-square regression analysis. The findings reveal a negative relationship between foreign ownership and bank costs. Foreign ownership implies a reduction in total costs of 4.1% while operating costs decline 1.1%. For each unit of foreign equity total costs go down 11.7% and operational costs fall 3.4%. Evidence also indicates that foreign board members introduce improvements in organizational structure and operational efficiency, according to the significant and negative relationship with operating costs. Furthermore, our results suggest that domestic banks’ dependence on traditional banking areas of business is reduced due to foreign board members’ experienced insights and understanding of markets and competition beyond the local environment. Foreign board membership reduces the interest margin on average 0.7% and increases the non-interest margin 0.4%. A 1% increase in the number of foreign board members reduces the net interest margin by 2.9%. A CEO with foreign nationality lowers the interest margin by 6.0%. Additionally, foreign directors with major influence on the board seem to be more willing to address the deterioration of asset quality by promoting the adoption of more prudent practices in lending and management of credit risk, which leads to higher levels of provisions for credit losses. These findings indicate that foreign ownership and board membership can play an important role in importing sophisticated managerial practices that can improve the performance of domestic banks. Indeed, the adoption of a global corporate governance system can improve bank performance, especially in countries in their early stages of financial development. |
publishDate |
2006 |
dc.date.none.fl_str_mv |
2006-09 2007-01-01T00:00:00Z 2007 2009-04-13T15:19:02Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/masterThesis |
format |
masterThesis |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10071/1400 |
url |
http://hdl.handle.net/10071/1400 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf application/octet-stream |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
instname_str |
Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
instacron_str |
RCAAP |
institution |
RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
repository.name.fl_str_mv |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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