No Smoking Gun: Private Shareholders, Governance Rules and Central Bank Financial Behavior

Do central banks with private shareholders differ in their financial behavior from purely public central banks? Private shareholders might bias central banks toward focusing excessively on profits, dividends and risks to their balance sheets, but their influence may also be mitigated by governance rules. We study 35 OECD central banks, including eight with private shareholders, using new data on governance rules. We find that central banks with private shareholders do not differ from their purely public counterparts in their profitability, nor are they more financially cautious in the sense of building more loss-absorbing capacity. Surprisingly, their transfers to governments out of current profits tend to be higher, not lower. We find that broader governance rules matter for financial payouts.