Bank Corporate Governance and Real Estate Lending during the Financial Crisis

Abstract

This paper examines the effects of bank corporate governance on real estate lending and loan losses during the 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.

Keywords: G01, G21, G30, R30

JEL Classification: Corporate governance, Bank performance, Real estate lending, Real estate losses, Financial crisis