Abstract
This paper examines the impact of financial expertise of supervisory board members on the risk-return profile of 200 German regional cooperative banks during the period 2004–2009. The results show that with more financial expertise the bank performance does not improve, but bank risk increases. These findings induce concerns that mandating financial expertise on boards is not necessarily beneficial for the risk-return profile of regional banks. We suggest that overconfidence of entrepreneurs in the supervisory boards leads to this unfavorable development since they represent the largest fraction of professionals within the sample.
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