TY - JOUR

T1 - Do all new brooms sweep clean?

T2 - Evidence for outside bank appointments

AU - Kick, Thomas

AU - Nehring, Inge

AU - Schertler, Andrea

PY - 2017/11

Y1 - 2017/11

N2 - Banks in bad financial shape are more likely to appoint executive directors from the outside than those in good shape. It is, however, not clear whether all of these appointments necessarily lead to the desired turnaround. We analyze the performance effects of new board members with external boardroom experience (outsiders) by distinguishing between good and bad managerial abilities of executives based on either ROA or risk-return efficiency of their previous employers. Our results show that banks appointing bad outsiders underperform other banks while those appointing good outsiders do so to a lesser extent. The performance differentials are highly pronounced in high-risk banks and in the post-crisis period.

AB - Banks in bad financial shape are more likely to appoint executive directors from the outside than those in good shape. It is, however, not clear whether all of these appointments necessarily lead to the desired turnaround. We analyze the performance effects of new board members with external boardroom experience (outsiders) by distinguishing between good and bad managerial abilities of executives based on either ROA or risk-return efficiency of their previous employers. Our results show that banks appointing bad outsiders underperform other banks while those appointing good outsiders do so to a lesser extent. The performance differentials are highly pronounced in high-risk banks and in the post-crisis period.

KW - Economics

KW - Bank performance

KW - Executive directors

KW - Managerial ability

KW - Outside appointments

U2 - 10.1016/j.jbankfin.2017.07.005

DO - 10.1016/j.jbankfin.2017.07.005

M3 - Journal articles

VL - 84

SP - 135

EP - 151

JO - Journal of Banking and Finance

JF - Journal of Banking and Finance

SN - 0378-4266

ER -