http://pbfea2005.rutgers.edu/20thFEA/AccountingPapers/Session6/Erkens,%20Hung,%20and%20Matos.pdf

Corporate governance in the 2007–2008 financial crisis: Evidence from financial institutions worldwide

The recent financial crisis has raised several questions with respect to the corporate governance of financial institutions. This paper investigates whether risk management-related corporate governance mechanisms, such as for example the presence of a chief risk officer (CRO) in a bank’s executive board and whether the CRO reports to the CEO or directly to the board of directors, are associated with a better bank performance during the financial crisis of 2007/2008. We measure bank performance by buy-and-hold returns and ROE and we control for standard corporate governance variables such as CEO ownership, board size, and board independence. Most importantly, our results indicate that banks, in which the CRO directly reports to the board of directors and not to the CEO (or other corporate entities), exhibit significantly higher (i.e., less negative) stock returns and ROE during the crisis. In contrast, standard corporate governance variables are mostly insignificantly or even negatively related to the banks’ performance during the crisis.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1942896_code362677.pdf?abstractid=1942896&rulid=5417022&mirid=1

Risk Management, Corporate Governance, and Bank Performance in the Financial Crisis

https://www.bde.es/f/webbde/GAP/Secciones/SalaPrensa/Agenda/Eventos/12/Ago/08.schaeck-berger-kick-dayahead.pdf

Executive board composition and bank risk taking

In this article, we examine the state of the art in comparative and international corporate governance by identifying the key research questions, main concepts, and paradigms of explanations of cross-country diversity in corporate governance. First, we discuss the multiple definitions of corporate governance across disciplines and explore how this multi-dimensional nature of corporate governance posses challenges when making cross-national comparisons. Second, we review existing comparative research on corporate governance and highlight some of the main characteristics of comparative analysis. Third, we analyze how comparative corporate governance has been understood from four different scholarly perspectives: economics and management, culture and sociology, legal, and political paradigms. We conclude from this third section that future research should make an effort to better integrate cross-disciplinary paradigms. Fourth, we investigate what insights these four perspectives bring to better understand change and stability in two particular governance dimensions: corporate ownership and the role of labor in comparative corporate governance. Finally, we conclude the article with some forward looking suggestions regarding (1) how different perspectives of corporate governance can be more effectively integrated by adopting case-based, historical and actor-centered forms of institutional explanations and by (2) discussing the current U.S. corporate governance system, frequently seen as the "best practice" model.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1851777_code260870.pdf?abstractid=1766002&mirid=3

Comparative and International Corporate Governance

Though overall bank performance from July 2007 to December 2008 was the worst since at least the Great Depression, there is significant variation in the cross-section of stock returns of large banks across the world during that period. We use this variation to evaluate the importance of factors that have been discussed as having contributed to the poor performance of banks during the credit crisis. More specifically, we investigate whether bank performance is related to bank-level governance, country-level governance, country-level regulation, and bank balance sheet and profitability characteristics before the crisis. Banks that the market favored in 2006 had especially poor returns during the crisis. Using conventional indicators of good governance, banks with more shareholder-friendly boards performed worse during the crisis. Banks in countries with stricter capital requirement regulations and with more independent supervisors performed better. Though banks in countries with more powerful supervisors had worse stock returns, we provide some evidence that this may be because these supervisors required banks to raise more capital during the crisis and that doing so was costly for shareholders. Large banks with more Tier 1 capital and more deposit financing at the end of 2006 had significantly higher returns during the crisis. After accounting for country fixed effects, banks with more loans and more liquid assets performed better during the month following the Lehman bankruptcy, and so did banks from countries with stronger capital supervision and more restrictions on bank activities.

/pdf/why-did-some-banks-perform-better-during-the-credit-crisis-a-8viubh1imm.pdf

Why Did Some Banks Perform Better During the Credit Crisis? A Cross-Country Study of the Impact of Governance and Regulation

The turmoil that struck financial institutions in 2007 has, by the end of 2011, significantly deteriorated the fundamentals of the global economy, eroding trust in sustainability of the markets, solvency of banks and even the credibility of sovereign states and monetary unions. Whether this is the most serious financial crisis since the Great Depression only history will tell, but it is clear by now that the damage to the global economy has been extraordinary. This chapter looks into some of the corporate governance lessons that could prevent this from happening again and presents the main findings and conclusions of the OECD Corporate Governance Committee as reflected in several OECD publications as well as in G.Kirkpatrick (2010).Corporate governance rules and practices of many of the financial institutions that collapsed have often been blamed to be partly responsible for the crisis. The failures of risk management systems and incentive schemes that encouraged and rewarded high levels of risk taking are key factors in this context. Since reviewing and guiding risk policy is a key function of the board, these deficiencies point to ineffective board oversight. And since boards are accountable to shareholders, they also have been put under the spotlight, as many of them seemed to have no interest in expressing their views on the functioning of companies as long as returns were within targets.Corporate governance failures are surely not the cause of the crisis, but they did not prevent and may have even facilitated some of the risky and misguided corporate practices that had such severe effects once the downturn started. Importantly, much of what we have learnt from the demise of some of these financial institutions can serve as an important lesson for non-financial corporations in general. Some of the key lessons from the corporate governance perspective are described in this article.This paper is structured as follows. In the first section we describe the macro-economic as well as the corporate governance dimension of the financial crisis, particularly the way remuneration practices, risk management procedures, limited board oversight as well as shareholder passivism contributed to the poor performance of some major banks. The second section explains how existing corporate governance principles and national corporate governance codes have been re-evaluated against this background, and some of the recent developments are presented. We finish offering some general conclusions.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2393978_code1598012.pdf?abstractid=2393978&mirid=1&type=2

Corporate Governance Lessons from the Financial Crisis

This paper provides an overview of current government schemes promoting corporate reporting of greenhouse gas (GHG) emissions and analyses their main building blocks. It describes the drivers and challenges for governments, companies and investors in dealing with GHG reporting and includes 4 case studies examining in more depth the domestic GHG emission reporting schemes of the UK, France, Japan and Australia. This work is part of a project with UNCTAD, the Climate Disclosure Standards Board (CDSB) and the Global Reporting Initiative (GRI) on consistency of climate change reporting.

Corporate Greenhouse Gas Emission Reporting: A Stocktaking of Government Schemes

Low CO 2 emitting urban infrastructure projects are expecte d to play an important role in mitigating climate change. By enabling projects to sell their CO 2 emission reductions on the international carbon market, the Clean Development Mechanism (CDM) turns the positive environmental benefits of such projects into financial cash flows. However, investors and lenders to these proj ects frequently face significant financial risks relating to the realisation of thes e cash flows, reducing the attractiveness of such projects for investors. This paper both identifies and proposes ways of mitigating project and partnership risks of CDM projects in the waste sectorbased on a literature review and several examples o f CDM projects. The paper concludes that public-private partnership s and the integration of external financial institutions can be used to mitigate cert ain exogenous and endogenous project risks by allocating them to that partner (p ublic project sponsor, private operator or external investors and lenders) who has private information on these risks or is most capable of assuming the risks. However, the relationship structures of the project s will become more complex. Partnership risks arise, which concern the distribu tion of carbon revenues between the partners. These risks differ from one contract type to the other. A concession contract (which allocates the carbon revenues directly to th e contracted private operator) can be preferred against a management contract (under which the operator is remunerated by a management fee) as this aligns the incentives between builder and operator of the infrastructure and mitigates partnership risks. Public and private financial institutions can assume project risks. Bank debt ma y be preferred over external equity as it increases the efforts of the operator in term s of CO 2 emission reductions.

Public and private risk sharing in the financing of low-emitting urban infrastructure projects: the case of CDM projects in the waste sector

L’investissement dans des infrastructures locales sobres en carbone est considere comme une composante importante de la lutte contre le changement climatique. Les mecanismes de reglementation climatique (comme la compensation carbone) font supporter aux developpeurs de projet les risques lies a la reduction des emissions de gaz a effet de serre (GES): les risques operationnels, technologiques ou lies au monitoring environnemental et aux mecanismes regulateurs. Nous montrons que l’efficacite environnementale et economique des projets depend en grande partie des modalites de partage de ces risques entre les differents acteurs impliques dans le projet. Sur un echantillon de projets de torchage des gaz d’enfouissement finances par le Mecanisme pour un Developpement Propre, il est montre que la delegation de la fourniture de la technologie cree des risques supplementaires. La delegation de l’elaboration de la documentation du projet selon les regles formelles de l’UNFCCC et la separation de l’operation de la decharge et du projet MDP semblent etre maitrisables par la mise en place de mesures de partage de risques.

Dorothee Teichmann

Papers

Corporate Governance Lessons from the Financial Crisis

Corporate Greenhouse Gas Emission Reporting: A Stocktaking of Government Schemes

Public and private risk sharing in the financing of low-emitting urban infrastructure projects: the case of CDM projects in the waste sector

The role of public-private partnerships in local infrastructure : the case of carbon offset projects