Corporate Governance, Opaque Bank Activities, and Risk/Return Efficiency: Pre- and Post-Crisis Evidence from Turkey

O.G. De Jonghe, M. Disli, K. Schoors

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Abstract

Does better corporate governance unambiguously improve the risk/return efficiency of banks? Or does either a re-orientation of banks' revenue mix towards more opaque products, an economic downturn, or tighter supervision create off-setting or reinforcing effects? The authors relate bank efficiency to shortfalls from a stochastic risk/return frontier. They analyze how internal governance mechanisms (CEO duality, board experience, political connections, and education profile) and external governance mechanisms (discipline exerted by shareholders, depositors, or skilled employees) determine efficiency in a sample of Turkish banks. The 2000 financial crisis was a wakeup call for bank efficiency and corporate governance. As a result, better corporate governance mechanisms have been able to improve risk/return efficiency when the economic, regulatory, and supervisory environments are more stable and bank products are more complex.
Original languageEnglish
Place of PublicationTilburg
PublisherEBC
Number of pages54
Volume2011-035
Publication statusPublished - 2011

Publication series

NameEBC Discussion Paper
Volume2011-035

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Keywords

  • corporate governance
  • bank risk
  • noninterest income
  • crisis
  • frontier. JELcodes

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