In recent years, the global financial sector has experienced two interrelated crises: the credit crisis and the sovereign debt crisis. A common question is whether the banks learned any lesson from the credit crisis. We address this question by examining whether the characteristics of the boards made any difference between the credit and the sovereign debt crises. We measure their effects against the risk-taking, performance, and the asset quality of large global banks. With a unique hand-collected data on 378 global banks, we find that the board’s structure and the CEO’s power explain the risk-taking, performance, and the asset quality of the banks during the sovereign debt crisis better than during the credit crisis. 

We find that the smaller the board’s size, the lower the levels of nonperforming and impaired loans. We also find that powerful CEOs were not involved in subprime lending. Therefore, the banks with powerful CEOs did not have assets of deteriorated quality. Our results also show that the lower the CEO’s power, the higher the stability of large global banks. 

Chair: Professor Tony Fang, Stockholm Business School, SBS, Stockholm University

Location and time: Board room 12:00-13:00