Governance, human capital and politicization of Spanish banks

ABSTRACT

Before the 2007 financial crisis, Spanish savings banks (Cajas) and commercial banks had shared, almost equally, the Spanish market for years. By 2012, the stakeholder-oriented Cajas had disappeared. We study if these different outcomes of Cajas and commercial banks respond to different ownership structures, governance practices and top managers’ human capital. Most of the previous debate has focused on the political affiliation of Cajas’ managers. We contribute to the debate by using broader measures of banks’ performance and by manually collecting chairman’s human capital (through proxies such as chairman’s experience, education, and political affiliation) for both bank types. We find that commercial banks took more risks in pre-crisis years and showed better risk-management than Cajas during the crisis. We find no evidence of the influence of chairman’s political affiliation on banks’ performance, but chairman’s firm experience and certain levels of education did have an impact on banks’ performance, showing that managers’ human capital deserves more attention. Finally, we analyse deeper Cajas-stakeholders’ participation, and while the presence of politicised seats in the governing bodies have no significant effects, larger employee participation or depositors’ involvement could have helped to improve the resilience of these stakeholder organisations during the crisis.

KEYWORDS:

• Corporate governance
• financial crisis
• financial risk
• human capital
• Spanish banks

JEL CLASSIFICATION:

• G21
• G32
• G33
• G34

Acknowledgments

For their ideas and insights that helped us to improve the paper, we are grateful to the guest editors and two anonymous referees. Also, we thank Esteban Lafuente for his advice. This research received financial support from the Spanish Ministry of Economy, Industry and Competitiveness (grant numbers: ECO2017-86305-C4-2-R) and from the Generalitat de Catalunya (grants 2017 SGR 1036 and 2017 SGR 1168).

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the Ministerio de Economía y Competitividad [ECO2013-48496-C4-4-R, CO2017-86305-C4-2-R].