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Central Bank’s Revolving Door Effect on Bank’s Performance and Financial Health

Masoudian Toroghi, Mohammad | 2024

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 57438 (44)
  4. University: Sharif University of Technology
  5. Department: Management and Economics
  6. Advisor(s): Fatemi Ardestani, Farshad; Mahmoudzadeh, Amineh
  7. Abstract:
  8. In this study, the revolving door effect on the bank’s performance is investigated through two paths: return on assets as an expression of banks' performance and capital adequacy ratio as a bank financial health indicator and the quality of central bank supervision. We assume these two variables are affected by conflict of interest. The form of conflict of interest used in this research is revolving doors. The board directors of commercial banks, who have previously worked in the central bank, create conflict-of-interest data. Twenty-seven commercial banks were investigated in this research between 2012 and 2022. the conflict-of-interest gap variable was defined in order to separate the effect of ability from the conflict of interest, which represents the number of years between the retirement from the central bank and starting to work on the board of directors. Stylized facts show the type of commercial bank’s ownership affects their performance and supervision, the conflict-of-interest effect on them is also different. Revolving doors are an agent-oriented concept that can be resolved by changing the agent, while state ownership creates a structural-oriented problem that cannot be resolved by changing the agent, the common solution to that matter is structural reformations. By dividing commercial banks into three groups: private, state-owned and semi-state-owned, we find that bank ownership changes the conflict-of-interest effect. While the conflict-of-interest effect on the capital adequacy ratio in private banks is positive and significant, it is not significant for state-owned. Basically, they are constantly exposed to conflict of interests by state ownership
  9. Keywords:
  10. Return Rate ; Capital Adequacy ; Government Ownership ; Revolving Door ; Capital Adequacy Ratio ; Structural-Oriented Conflict Of Interest

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