Corporate governance of banks and financial stability

D. Anginer, Asli Demirguc-Kunt, Harry Huizinga, Kebin Ma

Research output: Contribution to journal › Article › Scientific › peer-review

Abstract

We find that shareholder-friendly corporate governance is associated with higher stand-alone and systemic risk in the banking sector. Specifically, shareholder-friendly corporate governance results in higher risk for larger banks and for banks that are located in countries with generous financial safety nets as banks try to shift risk toward taxpayers. We confirm our findings by comparing banks to nonfinancial firms and examining changes in bank risk around an exogenous regulatory change in governance. Our results underline the importance of the financial safety net and too-big-to-fail guarantees in thinking about corporate governance reforms at banks.
Original languageEnglish
Pages (from-to)327-346
JournalJournal of Financial Economics
Volume130
Issue number2
DOIs
Publication statusPublished - Nov 2018

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Corporate governance
Financial stability
Bank stability
Financial safety net
Shareholders
Too big to fail
Governance
Corporate governance reform
Bank risk
Systemic risk
Regulatory change
Guarantee
Banking sector

Keywords

  • coporate governance
  • bank insolvency
  • systemic risk

Cite this

Anginer, D. ; Demirguc-Kunt, Asli ; Huizinga, Harry ; Ma, Kebin. / Corporate governance of banks and financial stability. In: Journal of Financial Economics. 2018 ; Vol. 130, No. 2. pp. 327-346.
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Anginer, D, Demirguc-Kunt, A, Huizinga, H & Ma, K 2018, 'Corporate governance of banks and financial stability' Journal of Financial Economics, vol. 130, no. 2, pp. 327-346. https://doi.org/10.1016/j.jfineco.2018.06.011

Corporate governance of banks and financial stability. / Anginer, D.; Demirguc-Kunt, Asli; Huizinga, Harry; Ma, Kebin.

In: Journal of Financial Economics, Vol. 130, No. 2, 11.2018, p. 327-346.

Research output: Contribution to journal › Article › Scientific › peer-review

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N2 - We find that shareholder-friendly corporate governance is associated with higher stand-alone and systemic risk in the banking sector. Specifically, shareholder-friendly corporate governance results in higher risk for larger banks and for banks that are located in countries with generous financial safety nets as banks try to shift risk toward taxpayers. We confirm our findings by comparing banks to nonfinancial firms and examining changes in bank risk around an exogenous regulatory change in governance. Our results underline the importance of the financial safety net and too-big-to-fail guarantees in thinking about corporate governance reforms at banks.

AB - We find that shareholder-friendly corporate governance is associated with higher stand-alone and systemic risk in the banking sector. Specifically, shareholder-friendly corporate governance results in higher risk for larger banks and for banks that are located in countries with generous financial safety nets as banks try to shift risk toward taxpayers. We confirm our findings by comparing banks to nonfinancial firms and examining changes in bank risk around an exogenous regulatory change in governance. Our results underline the importance of the financial safety net and too-big-to-fail guarantees in thinking about corporate governance reforms at banks.

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Anginer D, Demirguc-Kunt A, Huizinga H, Ma K. Corporate governance of banks and financial stability. Journal of Financial Economics. 2018 Nov;130(2):327-346. https://doi.org/10.1016/j.jfineco.2018.06.011

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