The corporate governance of banks

By Ross Levine. 2003

612 citations recorded by the source corpus.

This paper examines the corporate governance of banks. When banks efficiently mobilize and allocate funds, this lowers the cost of capital to firms, boosts capital formation, and stimulates productivity growth. Thus, weak governance of banks reverberates throughout the economy with negative ramifications for economic development. After reviewing the major governance concepts for corporations in general, this paper discusses two special attributes of banks that make them special in practice: greater opaqueness than other industries and greater government regulation. These attributes weaken many traditional governance mechanisms. Next, the paper reviews emerging evidence on which government policies enhance the governance of banks and draws tentative policy lessons. In sum, existing work suggests that it is important to strengthen the ability and incentives of private investors to exert governance over banks rather than relying excessively on government regulators.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/1bb0fb59fd0f133c814c782323424b47d22024b0

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

In Finance

Citations in the corpus

Did Good Corporate Governance Improve Bank Performance during the Financial Crisis? (2011, neutral): “…e.g. in Caprio et al. (2007), Cornett et al. (2009), de Andres and Vallelado (2008), Hanazaki and Horiuchi (2003), Jiraporn and Chintrakarn (2009), Laeven and Levine (2009), Macey and O’Hara (2003), Mishra and Nielsen (2000), Pacini et al. (2005), Sierra et al. (2006), and Webb Cooper (2009).”
Age diversity, directors' personal values, and bank performance (2016, background): “Facing greater liquidity problems with high leverage and severe information asymmetry, directors in banks are different from non-bank directors as they are accountable to not only shareholders but also depositors and regulators (Levine, 2004; García-Meca et al., 2015).”
Corporate Governance and Performance in the Wake of the Financial Crisis: Evidence from US Commercial Banks (2011, background): “Second, debt holders tend to be more conservative and are more likely to constrain the risk-taking activities of a firm (Levine, 2004; Mintz, 2005).”
Monitoring bank performance in the presence of risk (2014, neutral): “Nonetheless, similarly to the case of the link between risk and performance, relatively few studies focus on the role of corporate governance on bank performance (see, e.g., Simpson and Gleason 1999; Macey and O’Hara 2003; Crespı́ et al. 2004; de Andres and Vallelado 2008; Laeven and Levine 2009).”
Risk Management, Corporate Governance, and Bank Performance in the Financial Crisis (2012, neutral): “Consistently, Adams and Mehran (2003) and Macey and O’Hara (2003) highlight the importance of taking differences in governance between banking and non-banking firms into consideration.”
East Meets West? Board Characteristics in an Emerging Market: Evidence from Turkish Banks (2008, background): “Indeed, if banks can mobilize and allocate funds efficiently, this will lower the cost of capital for firms, along with encouraging capital formation and ultimately thus lead to productivity growth (Levine, 2004).”
Corporate Governance, Corporate Ownership, and the Role of Institutional Investors: A Global Perspective (2003, positive): “For example, Macey and O’Hara (2001) argue that the uniqueness of the banking industry requires different corporate governance structures from other industries.”
Corporate social responsibility and earnings management in U.S. banks (2014, background): “Their diversified financial operations and products, such as derivative financial instruments (Heilpern, Haslam, and Andersson, 2009; Lewis, 2009), are characterized by great opacity and information asymmetry (Furfine, 2001; Levine, 2004; Mulbert, 2009), which essentially complicates their financial”
Risky Lending: Does Bank Corporate Governance Matter? (2017, positive): “In addition, Flannery (1998) and Levine (2004) argue that excessive risk-taking by banks can create significant negative externalities and systemic risk due to the unique position of banks in financial intermediation and the payment system.”
Is Corporate Governance Different for Bank Holding Companies? (Part 2: The Governance of Banks) (2003, positive): “Second, many stakeholder groups—that is, competitors and consumer advocates—can use the delay to organize opposition to a regulated acquisition and influence the decision of the regulatory body (see McGlaughlin and Mehran [1995] for a similar discussion of hostile offers in the utilities industry).”
Corporate Governance in Institutions Offering Islamic Financial Services: Issues and Options (2006, background): “For more see Levine (2004) and Prowse (1998).”