The Roles of Corporate Governance in Bank Failures During the Recent Financial Crisis

Allen N. Berger, Björn Imbierowicz, Christian Rauch

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We analyze the roles of bank ownership, management, and compensation structures in bank failures during the recent financial crisis. Our results suggest that failures are strongly influenced by ownership structure: high shareholdings of lower-level management and non-chief executive officer (non-CEO) higher-level management increase failure risk significantly. In contrast, shareholdings of banks’ CEOs do not have a direct impact on bank failure. These findings suggest that high stakes in the bank induce non-CEO managers to take high risks due to moral hazard incentives, which may result in bank failure. We identify tail risk in noninterest income as a primary risk-taking channel of lower-level managers.
Original languageEnglish
JournalJournal of Money, Credit and Banking
Issue number4
Pages (from-to)729-770
Number of pages42
Publication statusPublished - 2016


  • Bank regulation
  • Bank default
  • Corporate governance

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