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DO SUPERVISORY ENFORCEMENT ACTIONS AFFECT board composition?

Cotugno, M., D'Amato, A., Gallo, A. ORCID: 0000-0002-8355-1689 and Stefanelli, V. (2020). DO SUPERVISORY ENFORCEMENT ACTIONS AFFECT board composition?. Corporate Governance: An International Review, doi: 10.1111/corg.12336

Abstract

Manuscript Type:
Empirical

Research Question/Issue:
Do enforcement actions impact banks’ board composition? Based on a unique sample of sanctions imposed on Italian banks by the country's banking supervisory authority from 2009 to 2015, we investigate whether supervisory enforcement actions affect changes at the board level. Moreover, we examine whether changes at the board level after a sanction are effective in reducing the probability of further sanctions in the future.

Research Findings/Insights:
The findings reveal that sanctioned banks change their board composition following a supervisory sanction. We further test whether these changes improve bank governance and find that under certain conditions, they may reduce the probability that the board is sanctioned again. Robustness tests confirm the results.

Theoretical/Academic Implications:
This study provides empirical evidence that supports the role of supervisory enforcement actions in inducing banks to adopt changes at the board level. Given that the relationship between supervisory sanctions and changes in board characteristics is still neglected, we contend that our results may increase the understanding of the effectiveness of enforcement actions in improving board characteristics.

Practitioner/Policy Implications:
We believe that our results have policy implications by making a clear and concrete contribution to the ongoing debate on the revision of the principles for enhancing corporate governance and banking supervision.

Publication Type: Article
Additional Information: This is the peer reviewed version of the following article: Cotugno, M., D'Amato, A., Gallo, A. and Stefanelli, V. (2020). DO SUPERVISORY ENFORCEMENT ACTIONS AFFECT board composition?. Corporate Governance: An International Review, which has been published in final form at https://doi.org/10.1111/corg.12336. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.
Publisher Keywords: Enforcement actions, Board of Directors, Supervisory Authority, Corporate Governance, Banking industry
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Departments: Business School > Finance
Date Deposited: 08 Oct 2020 10:50
URI: https://openaccess.city.ac.uk/id/eprint/25039
[img] Text - Accepted Version
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