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Title: Bank corporate governance, risk management and ownership in the EU member and candidate nations
Author: Onal, Mehmet
ISNI:       0000 0004 7972 6110
Awarding Body: Bangor University
Current Institution: Bangor University
Date of Award: 2019
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This thesis examines the process of European Union (hereafter EU) accession and membership on bank corporate governance structure, bank performance, bank risk, risk management and ownership structure in new EU member and candidate nations. This thesis explores whether this political process of EU accession and membership has influenced these areas of bank activity. Three empirical chapters of this study investigate the questions using a hand-collected dataset of banks from EU member and candidate nations with the assessment based on three principles. First, the analysis examines the influence of a political organisation, the EU, and the political process on these three main topics. Second, the analysis brings an interdisciplinary approach to explain this influence by employing finance and economics theories. Lastly, this thesis uses three original, hand-collected and cross-national datasets in the empirical chapters. The thesis reports that the EU accession process and the EU membership has a remarkable influence on corporate governance structure and performance, risk management and risk, and ownership of sample banks in member and candidate nations. The thesis indicates that the accession process has influenced the take up of beneficial corporate governance practices. Distinctly, long-term membership of the EU has a little further influence on the dissemination of these positive corporate governance characteristics. Over the sample period, banks in candidate nations involved in the accession process display better financial performance whereas the financial performance of banks in member nations has been poorer. The thesis finds that while accession to the EU has engendered sound risk management structures, this progress is not as much as that experienced by banks in member nations. This political process, therefore, appears to explain some of the currently unexplained variations in bank risk management observed across Europe in recent years. The univariate tests and random effect model results indicate that banks in new member states have a better risk management structure and the EU accession process and membership improves this. In regarding selected risk measures, banks in member nations show worse risk performance compared to banks operating in candidate nations. The relationship between risk management structure and risk measures of sample banks provides mixed results. The thesis demonstrates that bank ownership is highly concentrated and foreign ownership is high in both member and candidate nations. These both are significantly higher for banks in member nations compared to banks from candidate nations. Due to increasing bank holding company (BHC) ownership of banks during the accession process and joining the EU, the percentage of shares held by financial institutions has increased, and individual/family, state and managerial ownerships have remained very low. It is reported that the political process of joining the EU influences the ownership structure of banks. Foreign, institutional, manager, and public ownership are higher in the membership period whereas, domestic, individual, private and state ownership lower in this period. This thesis proposes some policy recommendations and research implications. One recommendation of the thesis considers board independence and the proportion of female directors. European Commission highlights the importance of the independent board members and the presence of female board members in several policy documents. Therefore, EU policymakers could recommend a mandatory quota system for female directors and independent directors both for directors of the board itself and for directors of the committees. The thesis indicates that the risk management structure of banks requires consideration. The importance of quality in risk management and internal control of banks has been raised especially after the recent financial crisis. The presence of an executive chief risk officer (hereafter CRO), female CROs and female board members, establishing a separate board committee that is solely responsible for risk management and the independence of this committee improve the quality of risk management of banks. The findings suggest that EU policymakers should endorse the establishment of these risk management structures in banks. The thesis displays that the share of foreigners in banks is very high. The dominance of foreign ownership could hinder the adoption of good corporate governance and risk management practices. Another recommendation is that the policymakers in the EU should maintain effective regulations to protect the rights of minority shareholders and sustain a competitive environment in the host nations banking industry.
Supervisor: Ashton, John ; Hodgkinson, Lynn Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: corporate governance ; Banking