IDEAS home Printed from https://ideas.repec.org/a/anr/refeco/v4y2012p215-232.html
   My bibliography  Save this article

Corporate Governance of Financial Institutions

Author

Listed:
  • Hamid Mehran

    (Federal Reserve Bank of New York, New York 10045)

  • Lindsay Mollineaux

    (Federal Reserve Bank of New York, New York 10045)

Abstract

We identify the tension between dueling expectations of financial institutions as value-maximizing entities that also serve the public interest. We highlight the importance of information in addressing the public desire for banks to be safe yet innovative. Regulators can choose several approaches to increase market discipline and information production. Information production can be mandated outside of markets through increased regulatory disclosure. Regulators can also directly motivate potential producers of information by changing their incentives. Traditional approaches to bank governance may interfere with the information content of prices. Thus, the lack of transparency in the banking industry may be a symptom rather than the primary cause of bad governance. We provide examples of compensation and resolution. Reforms that promote the quality of security prices through information production can improve the governance of financial institutions. Future research is needed to examine the interactions between disclosure, information, and governance.

Suggested Citation

  • Hamid Mehran & Lindsay Mollineaux, 2012. "Corporate Governance of Financial Institutions," Annual Review of Financial Economics, Annual Reviews, vol. 4(1), pages 215-232, October.
  • Handle: RePEc:anr:refeco:v:4:y:2012:p:215-232
    as

    Download full text from publisher

    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-financial-110311-101821
    Download Restriction: Full text downloads are only available to subscribers. Visit the abstract page for more information.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Walter Gontarek & Ruth Bender, 2019. "Examining risk governance practices in global financial institutions: the adoption of risk appetite statements," Journal of Banking Regulation, Palgrave Macmillan, vol. 20(1), pages 74-85, March.
    2. Daniel Ofori-Sasu & John Kuwornu & Gloria Clarissa Dzeha & Baah Aye Kusi, 2022. "Risk behaviour and insurance efficiency: the role of ownership and regulations from an emerging economies," SN Business & Economics, Springer, vol. 2(7), pages 1-30, July.
    3. Stulz, Rene M., 2014. "Governance, Risk Management, and Risk-Taking in Banks," Working Paper Series 2014-10, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    4. César Portalanza Chinguel, 2021. "Gobierno corporativo y desastre financiero en el sistema financiero. El caso de una microfinanciera," Revista de Análisis Económico y Financiero, Universidad de San Martín de Porres, vol. 4(01), pages 25-30.
    5. Nizar Dwaikat & Mohamed Imen Gallali & Mohammed Saadeh, 2021. "The Impact of Family Ownership on the Capital Structure of Palestinian Firms," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 32-52.
    6. Bushman, Robert M. & Davidson, Robert H. & Dey, Aiyesha & Smith, Abbie, 2018. "Bank CEO materialism: Risk controls, culture and tail risk," Journal of Accounting and Economics, Elsevier, vol. 65(1), pages 191-220.
    7. Bushman, Robert M., 2014. "Thoughts on financial accounting and the banking industry," Journal of Accounting and Economics, Elsevier, vol. 58(2), pages 384-395.
    8. Brandao-Marques, L. & Correa, R. & Sapriza, H., 2012. "International Evidence on Government Support and Risk-Taking in the Banking Sector," Other publications TiSEM 4a9756af-eb63-4867-ae29-3, Tilburg University, School of Economics and Management.
    9. Rene M. Stulz, 2016. "Risk management, governance, culture, and risk taking in banks," Economic Policy Review, Federal Reserve Bank of New York, issue Aug, pages 43-60.
    10. Raoudha Dhouibi & Abir Mabrouk & Emna Rouetbi, 2016. "Bank Transparency and Risk Taking: Empirical Evidence from Tunisia," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(5), pages 111-123, May.
    11. Cesar Portalanza Chinguel, 2019. "Una nota sobre el gobierno corporativo en la industria bancaria," Revista de Análisis Económico y Financiero, Universidad de San Martín de Porres, vol. 1(03), pages 48-54.
    12. Tam, On Kit & Liang, Hsin-Yu & Chen, Sheng-Hung & Liu, Bin, 2021. "Do valued independent directors matter to commercial bank performance?," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 1-20.
    13. Heider, Florian & Calcagno, Riccardo, 2016. "Liquidity, Information Aggregation, and Market-Based Pay in an Efficient Market," CEPR Discussion Papers 11298, C.E.P.R. Discussion Papers.
    14. Lidiia Karpenko & Iryna Chunytska & Nataliia Oliinyk & Nataliia Poprozman & Olha Bezkorovaina, 2020. "Consideration of Risk Factors in Corporate Property Portfolio Management," JRFM, MDPI, vol. 13(12), pages 1-14, November.
    15. Dorina CLICHICI & Iulia LUPU, 2015. "Corporate Governance – Determinant Of Moldovan Banking System Stability," ECONOMY AND SOCIOLOGY: Theoretical and Scientifical Journal, Socionet;Complexul Editorial "INCE", issue 1, pages 93-96.
    16. Robert M. Bushman & Bradley E. Hendricks & Christopher D. Williams, 2016. "Bank Competition: Measurement, Decision‐Making, and Risk‐Taking," Journal of Accounting Research, Wiley Blackwell, vol. 54(3), pages 777-826, June.
    17. Kutubi, Shawgat S. & Ahmed, Kamran & Khan, Hayat & Garg, Mukesh, 2021. "Multiple directorships and the extent of loan loss provisions: Evidence from banks in South Asia," Journal of Contemporary Accounting and Economics, Elsevier, vol. 17(3).
    18. Kutubi, Shawgat S. & Ahmed, Kamran & Khan, Hayat, 2018. "Bank performance and risk-taking — Does directors' busyness matter?," Pacific-Basin Finance Journal, Elsevier, vol. 50(C), pages 184-199.
    19. Hummel, Katrin & Laun, Ute & Krauss, Annette, 2021. "Management of environmental and social risks and topics in the banking sector - An empirical investigation," The British Accounting Review, Elsevier, vol. 53(1).

    More about this item

    Keywords

    financial institutions; governance; disclosure; information; market discipline; financial crisis;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:anr:refeco:v:4:y:2012:p:215-232. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: http://www.annualreviews.org (email available below). General contact details of provider: http://www.annualreviews.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.