Management Insulation and Bank Failures

Management Insulation and Bank Failures

Daniel Ferreira, David Kershaw, Tom Kirchmaier, Edmund-Philipp Schuster

Series number :

Serial Number: 

Date posted :

February 01 2013

Last revised :

April 19 2021
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  • Corporate governance • 
  • bank bailouts

How does management insulation from shareholder pressure influence banks’ resilience to crises? To address this question, we develop a measure of management insulation based on legal provisions. Unlike the existing alternatives, our measure considers the interactions between different provisions.

We use this measure to study the relationship between management insulation and bank failure during the 2007-09 financial crisis. We find that banks in which managers were more insulated from shareholders in 2003 were less likely to be both bailed out in 2008/09 and targeted by activist shareholders. By contrast,  alternative measures of management insulation fail to predict both bailouts and shareholder activism.

Published in

Published in: 
Publication Title: 
Journal of Financial Intermediation, Forthcoming


Real name:
Tom Kirchmaier
Real name:
Edmund-Philipp Schuster