Corporate Governance of Financial Institutions
AbstractWe 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.
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Bibliographic InfoArticle provided by Annual Reviews in its journal Annual Review of Financial Economics.
Volume (Year): 4 (2012)
Issue (Month): 1 (October)
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Postal: Annual Reviews 4139 El Camino Way Palo Alto, CA 94306, USA
Web page: http://www.annualreviews.org
Other versions of this item:
- 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
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