European Banks’ Legal Provisions and Financial Crises: The Influence of Corporate Governance and Institutional Environment

Jorge Gallud Cano & Felix J.Lopez-Iturriaga & Oscar Lopez-De-Foronda Perez, 2020. "European Banks’ Legal Provisions and Financial Crises: The Influence of Corporate Governance and Institutional Environment," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty

24 Pages Posted: 16 Jun 2020 Last revised: 17 Jun 2020

See all articles by Jorge Gallud Cano

Jorge Gallud Cano

University of Valladolid - Department of Finance and Accounting

Félix J. López-Iturriaga

Universidad de Valladolid - Department of Finance and Accounting; National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy

Óscar López-de-Foronda

University of Burgos - Department of Economics

Date Written: May 21, 2020

Abstract

We study the legal provisions of 92 European systemic banks from 18 countries over the years 2008-2017. Since legal provisions may be viewed as a mechanism for disclosing information to capital markets, the creation of legal provisions is determined by the risk taken by the bank and the managerial incentives to disclose information. Our results show an initial negative relationship between managers’ discretionary investments and legal provisions, even when we control for risk taking. We also find that board of director independence has a moderating effect in order to guard against future lawsuits. Similarly, a better institutional framework amplifies the positive influence of the board of directors.

Keywords: legal provisions, risk, corporate governance, institutional framework, European banks

JEL Classification: G32, G38

Suggested Citation

Gallud Cano, Jorge and Lopez-Iturriaga, Felix Javier and Lopez de Foronda, Oscar, European Banks’ Legal Provisions and Financial Crises: The Influence of Corporate Governance and Institutional Environment (May 21, 2020). Jorge Gallud Cano & Felix J.Lopez-Iturriaga & Oscar Lopez-De-Foronda Perez, 2020. "European Banks’ Legal Provisions and Financial Crises: The Influence of Corporate Governance and Institutional Environment," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty , Available at SSRN: https://ssrn.com/abstract=3607230

Jorge Gallud Cano (Contact Author)

University of Valladolid - Department of Finance and Accounting ( email )

Avda. Valle Esgueva 6
47011 Valladolid
Spain

Felix Javier Lopez-Iturriaga

Universidad de Valladolid - Department of Finance and Accounting ( email )

Avda. Valle Esgueva 6
47011 Valladolid
Spain
+34 983 184 395 (Phone)
+34 983 183830 (Fax)

National Research University Higher School of Economics - International Laboratory of Intangible-driven Economy ( email )

Lebedeva,27
Perm, Perm 614070
Russia

Oscar Lopez de Foronda

University of Burgos - Department of Economics ( email )

Plaza Infanta Elena
E09001 Burgos
Spain

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