Why Bank Governance is Different

Becht, Marco, Bolton, Patrick and Roell, Ailsa (2011) Why Bank Governance is Different. Oxford Review of Economic Policy, 27 (3). pp. 437-463.

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Official URL: http://tse-fr.eu/pub/26388

Abstract

This paper reviews the pattern of bank failures during the financial crisis and asks whether there was a link with corporate governance. It revisits the theory of bank governance and suggests a multi-constituency approach that emphasizes the role of weak creditors. The empirical evidence suggests that, on average, banks with stronger risk officers, less independent boards, and executives with less variable remuneration incurred fewer losses. There is no evidence that institutional shareholders opposed aggressive risk-taking. The Financial Stability Board published Principles for Sound Compensation Practices in 2009, and the Basel Committee on Banking Supervision issued principles for enhancing corporate governance in 1999, 2006, and 2010. The reports have in common that shareholders retain residual control and executive pay continues to be aligned with shareholder interests. However, we argue that bank governance is different and requires more radical departures from traditional governance for non-financial firms.

Item Type: Article
Language: English
Date: 2011
Refereed: Yes
JEL codes: G20 - General
G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
G24 - Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
G28 - Government Policy and Regulation
G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 09 Jul 2014 17:30
Last Modified: 07 Mar 2018 13:22
OAI ID: oai:tse-fr.eu:26388
URI: http://publications.ut-capitole.fr/id/eprint/15416

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