In this paper, we expand the scarce literature regarding the effects of ownership structure and board composition on market measures of banks’ systemic risk. Based on a sample of 87 European banks over the period 2010–2016, we provide evidence that ownership concentration has a non-monotonic (inverted u-shape) relationship with systemic risk. Additionally, we find that board characteristics (board size and gender) affect a bank’s systemic risk, but for small banks only. Overall, our evidence suggests that the traditional banks’ size-focused approach to systemic risk study should be complemented with governance dimensions, especially in a context like the European one, where ownership concentration is high. Our results also imply that practitioners and policymakers should promote better governance practices in banks in the form of more adequate ownership and board structures that are better able to control systemic risk.
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In fact, Stulz  concludes that the success of banks and the health of the financial system depend in a critical manner on their risk management.
Banks’ systemic risk literature has traditionally focused on two fields. On the one hand, how to measure this risk has been widely studied (some recent examples are [4, 37, 85]). On the other hand, the “too big to fail” principle has been incorporated into the study of certain corporate decisions by banks (see for instance [7, 80, 79]).
For example, according to the IMF, the average ratio of banks’ assets to world GDP increased from 37.5 to 65.6 percent between 1985 and 2016, while the OCDE statistics (2010) show that banks control, on average, 75% of the financial assets.
As reported by Laeven and Valencia , there have been 145 banking crises all over the world in the period spanning 1975 to 2010.
According to the ECB (2009), the banking business is characterized by higher regulatory requirements, a particular capital structure and the existence of different business models (from traditional to more complex).
Closing session, Systemic Risk Conference (Lisbon, February 3, 2012). Available at http://www.apb.pt/content/files/Vitor_Gaspar_-_Ministro_do_Estado_e_das_Financas.pdf (accessed: 23/12/2020).
See “Global systemically important banks: revised assessment methodology and the higher loss absorbency requirement,” p. 4, July 2018, available at https://www.bis.org/bcbs/publ/d445.htm (accessed: 23/12/2020).
For instance, Haan and Vlahu  find that some of the empirical regularities found in the literature on corporate governance of nonfinancial institutions, such as the positive (negative) association between board independence (size) and performance, do not hold for banks.
The sample was built up by including banks not only from the largest European countries (which typically include the largest banks and, hence, easier access to information), but also from the remainder European ones, in order to consider each country specificity in terms of governance.
List of banks per country is provided in the appendix.
Following previous literature, we have only considered those institutional investors that hold at least 5% of the shares.
An independent director has only business relationships with the bank through his or her directorship, i.e., an independent director cannot be an existing or former employee of a bank nor its immediate family members and does not have any significant business ties with the bank.
The classification of independent is the one provided by both BoardEx and the data we have manually collected. There are banks where all the directors are classified as independent (French saving banks for instance). In later robustness checks, we run our experiments excluding such banks.
We have performed an additional analysis removing those banks with extreme ownership values, and the results are analogous to those obtained in Table 5.
Additionally, the logarithm of market capitalization has been utilized as a division criteria between small and big banks. The results are analogous to those reported in Table 6.
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Appendix: Composition of the sample by countries
Appendix: Composition of the sample by countries
Bank fuer Tirol und Vorarlberg AG
BKS Bank AG
Erste Group Bank AG
Raiffeisen Bank International AG
KBC Groep NV
Danske Bank A/S
Jyske Bank A/S
Ringkjoebing Landbobank A/S
Spar Nord Bank A/S
BNP Paribas SA
Caisse Regionale de Credit Agricole Mutuel de Normandie Seine SC
Credit Agricole SA
Societe Generale SA
Aareal Bank AG
Comdirect Bank AG
Deutsche Bank AG
Dvb Bank SE
HSBC Trinkaus and Burkhardt AG
Oldenburgische Landesbank AG
Alpha Bank SA
Attica Bank SA
Eurobank Ergasias SA
National Bank of Greece SA
Allied Irish Banks PLC
Bank of Ireland
Permanent TSB Group Holdings PLC
Banca Carige SpA Cassa di Risparmio di Genova e Imperia
Banca Intermobiliare di Investimenti e Gestioni SpA
Banca Monte dei Paschi di Siena SpA
Banca Popolare dell'Emilia Romagna Sc
Banca Popolare di Milano Scarl
Banca Profilo SpA
Credito Emiliano SpA
Intesa Sanpaolo SpA
Mediobanca Banca di Credito Finanziario SpA
Unione di Banche Italiane SpA
ING Groep NV
Van Lanschot NV
Sparebank 1 SMN
Sparebank 1 SR Bank ASA
Bank Millennium SA
Bank Zachodni WBK SA
Getin Noble Bank SA
ING Bank Slaski SA
Powszechna Kasa Oszczednosci Bank Polski SA
Banco Bpi SA
Banco Comercial Portugues SA
Banco Bilbao Vizcaya Argentaria SA
Banco de Sabadell SA
Banco Popular Español SA
Banco Santander SA
Nordea Bank AB
Skandinaviska Enskilda Banken AB
Svenska Handelsbanken AB
Bank Coop AG
Banque Cantonale de Geneve
Banque Cantonale Vaudoise
Berner Kantonalbank AG
Credit Suisse Group AG
Edmond de Rothschild Suisse SA
EFG International AG
Julius Baer Gruppe AG
Luzerner Kantonalbank AG
St Galler Kantonalbank AG
UBS Group AG
Valiant Holding AG
Close Brothers Group PLC
HSBC Holdings PLC
Lloyds Banking Group PLC
Royal Bank of Scotland Group PLC
Standard Chartered PLC
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Díez-Esteban, J.M., Farinha, J.B., García-Gómez, C.D. et al. Does board composition and ownership structure affect banks’ systemic risk? European evidence. J Bank Regul 23, 155–172 (2022). https://doi.org/10.1057/s41261-021-00148-2