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FDIC Improvement Act and corporate governance of commercial banks

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  • James R. Booth

Abstract

This paper examines provisions of the FDIC Improvement Act related to corporate governance of banks. These provisions focus on the composition and independence of the audit committee and on increased regulatory influence over executive compensation. The composition of audit committees for a sample of banking firms for 1990 is compared with those of industrial firms and with the provisions of FDICIA. The findings suggest only minor differences between banks and other firms; however, under FDICIA provisions, large changes in the composition of bank audit committees are likely. Provisions related to compensation have focused on CEOs. To address this issue, I compare the 1990 levels and factors explaining differences in CEO compensation for a sample of banks and industrial firms. The findings suggest that bank CEOs earn slightly less than their industrial counterparts and that cross-sectional differences in CEO compensation in banking and other industries are explained by similar factors.

Suggested Citation

  • James R. Booth, 1993. "FDIC Improvement Act and corporate governance of commercial banks," Economic Review, Federal Reserve Bank of San Francisco, pages 14-22.
  • Handle: RePEc:fip:fedfer:y:1993:p:14-22:n:1
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    File URL: http://www.frbsf.org/publications/economics/review/1993/93-1_14-22.pdf
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    References listed on IDEAS

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    1. Chun I. Lee & Stuart Rosenstein & Nanda Rangan & Wallace N. Davidson III, 1992. "Board Composition and Shareholder Wealth: The Case of Management Buyouts," Financial Management, Financial Management Association, vol. 21(1), Spring.
    2. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    3. Rosenstein, Stuart & Wyatt, Jeffrey G., 1990. "Outside directors, board independence, and shareholder wealth," Journal of Financial Economics, Elsevier, vol. 26(2), pages 175-191, August.
    4. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-264, April.
    5. Weisbach, Michael S., 1988. "Outside directors and CEO turnover," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 431-460, January.
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    Cited by:

    1. Gorton, Gary & Rosen, Richard, 1995. " Corporate Control, Portfolio Choice, and the Decline of Banking," Journal of Finance, American Finance Association, vol. 50(5), pages 1377-1420, December.
    2. Haye, Eric M., 1997. "Corporate control effects and managerial remuneration in commercial banking," Journal of Economics and Business, Elsevier, vol. 49(3), pages 239-252.

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