Corporate governance norms and practices

Does regulation substitute or complement governance?

“…Since our previous results show that board size is not an alternative monitoring mechanism for insider holdings, we omit this mechanism to reduce the number of equations and focus on insider holdings, monitoring directors and holdings, and equity-based compensation. Omitting board size is also consistent with Chhaochharia and Laeven (2009), who find board size is not a significant determinant of a firm's overall governance system. We use two methods to address this concern of interdependency.…”

The persistence of bank profit

“…Governance rules and practice differ between countries, and are dependent on the level of economic and financial development (La Porta et al, 1998Chhaochharia and Laeven, 2009). Four institutional and external governance covariates are considered, covering economic freedom, institutional development, GDP per capita, and property rights.…”

Did Good Corporate Governance Improve Bank Performance during the Financial Crisis?

“…Given that the prior literature (see e.g., Black et al 2006;Cremers and Ferrell 2010) has suggested that corporate governance structures change slowly and the implications of the governance practices can be seen with a lag, we use the Gov-Scores for year 2005 in our empirical analysis. Hence, we assume in our analysis that the strength of corporate governance can be quantified with the Gov-Score index, and moreover, that the strength of governance mechanism incorporated in 2005 is reflected in bank performance during 2005-2008. Considerable empirical evidence suggests that strong corporate governance has positive effects on the firm's financial performance, market valuation, and stock returns (see e.g., Ammann et al 2011;Bebchuk et al 2009;Bhagat and Bolton 2008;Brown andCaylor 2006, 2009;Chhaochharia and Laeven 2009;Cremers and Ferrell 2010;Gompers et al 2003;Johnson et al 2009;Renders et al 2010). Following the prior bank performance literature (e. g., Caprio et al 2007;Chiorazzo et al 2008;Ciciretti et al 2009;de Andres and Vallelado 2008;Outreville 2010;Sierra et al 2006), we employ return on assets (ROA) and Tobin's Q to measure the financial performance and market valuation of banks.…”

“…Previously, an extensive empirical literature has documented that firms with strong corporate governance mechanisms are generally associated with better financial performance, higher firm valuation and higher stock returns (see e.g., Ammann et al 2011;Bebchuk et al 2009;Bhagat and Bolton 2008;Brown andCaylor 2006, 2009;Chhaochharia and Laeven 2009;Core et al 2006;Cremers and Ferrell 2010;Cremers and Nair 2005;Gompers et al 2003;Johnson et al 2009;Renders et al 2010). The role of corporate governance in the banking industry has been examined e.g.…”