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Bank Corporate Governance and Real Estate Lending During the Financial Crisis

Author

Listed:
  • Emilia Peni

    (University of Vaasa)

  • Stanley D. Smith

    (University of Central Florida)

  • Sami Vahamaa

    (University of Vaasa)

Abstract

This paper examines the effects of bank corporate governance on real estate lending and loan losses during the recent financial crisis. The results indicate that banks with stronger corporate governance mechanisms had higher profitability during the period 2006–2009. Our findings on the effects of corporate governance on real estate lending performance are mixed and depend on the definition of the crisis period. Although banks with stronger governance practices had a lower amount of real estate loan losses during 2006–2008, our results also show that these banks experienced significantly larger losses in 2009.

Suggested Citation

  • Emilia Peni & Stanley D. Smith & Sami Vahamaa, 2013. "Bank Corporate Governance and Real Estate Lending During the Financial Crisis," Journal of Real Estate Research, American Real Estate Society, vol. 35(3), pages 313-344.
    • Handle: RePEc:jre:issued:v:35:n:3:2013:p:313-344
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    Citations

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    Cited by:

    1. Fang, Hao & Lee, Jen-Sin & Chung, Chien-Ping & Lee, Yen-Hsien & Wang, Wen-Hao, 2020. "Effect of CEO power and board strength on bank performance in China," Journal of Asian Economics, Elsevier, vol. 69(C).
    2. Iqbal, Jamshed & Strobl, Sascha & Vähämaa, Sami, 2015. "Corporate governance and the systemic risk of financial institutions," Journal of Economics and Business, Elsevier, vol. 82(C), pages 42-61.
    3. Patrick Bergmann & Endre Kamarás & Werner Gleißner & Edeltraud Guenther, 2020. "Enhanced Cash Flow Valuation in Real Estate Management by Integrating Innovative Materials and Risk Assessment," Sustainability, MDPI, vol. 12(6), pages 1-26, March.
    4. McNulty, James E. & Akhigbe, Aigbe, 2017. "What do a bank’s legal expenses reveal about its internal controls and operational risk?," Journal of Financial Stability, Elsevier, vol. 30(C), pages 181-191.
    5. Palvia, Ajay & Vähämaa, Emilia & Vähämaa, Sami, 2020. "Female leadership and bank risk-taking: Evidence from the effects of real estate shocks on bank lending performance and default risk," Journal of Business Research, Elsevier, vol. 117(C), pages 897-909.
    6. Akhigbe, Aigbe & McNulty, James E. & Stevenson, Bradley A., 2017. "Does the form of ownership affect firm performance? Evidence from US bank profit efficiency before and during the financial crisis," The Quarterly Review of Economics and Finance, Elsevier, vol. 64(C), pages 120-129.
    7. Jamshed Iqbal & Sami Vähämaa, 2019. "Managerial risk-taking incentives and the systemic risk of financial institutions," Review of Quantitative Finance and Accounting, Springer, vol. 53(4), pages 1229-1258, November.
    8. Walter Gontarek & Yacine Belghitar, 2018. "Risk governance: Examining its impact upon bank performance and risk‐taking," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 27(5), pages 187-224, December.
    9. Ali, Searat & Hussain, Nazim & Iqbal, Jamshed, 2021. "Corporate governance and the insolvency risk of financial institutions," The North American Journal of Economics and Finance, Elsevier, vol. 55(C).
    10. Hao Fang & Chieh-Hsuan Wang & Hwey-Yun Yau & Chien-Ping Chung & Yen-Hsien Lee, 2023. "The impact of board structure on bank loan herding via mediation of underperformance," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 30(6), pages 1494-1517, November.
    11. Contreras, Salvador & Ghosh, Amit & Hasan, Iftekhar, 2023. "The effect of bank failures on small business loans and income inequality," Journal of Banking & Finance, Elsevier, vol. 146(C).

    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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