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 credit crisis around the globe: Why did some banks perform better?.

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

Manuscript Type: Empirical Research Questions/Issue: This paper seeks to explore the interrelationships between corporate governance (CG) and corporate social responsibility (CSR): first, theoretically, by reviewing the literature and surveying various postulations on offer; second, empirically, by investigating the conception and interpretation of this relationship in the context of a sample of firms operating in Lebanon. Accordingly, the paper seeks to highlight the increasing cross-connects or interfaces between CG and CSR, capitalizing on fresh insights from a developing country perspective. Research Findings/Results: A qualitative interpretive research methodology was adopted, drawing on in-depth interviews with the top managers of eight corporations operating in Lebanon, with the findings suggesting that the majority of managers conceive of CG as a necessary pillar for sustainable CSR. These findings are significant and interesting, implying that recent preoccupation with CG in developing countries is starting to be counterbalanced by some interest/attention to CSR, with growing appreciation of their interdependencies and the need to move beyond CG conformance toward voluntary CSR performance. Theoretical Implications: This study makes two important contributions. First, it suggests that there is a salient two-way relationship and increasing overlap between CG and CSR. While much previous literature has researched CG and CSR independently, this paper makes the case for considering them jointly and systematically. Second, the paper outlines a number of theoretical propositions that can serve as the basis for future research on the topic, particularly in developing countries, given that the data and theoretical propositions are both derived from and tailored to developing country contexts. Practical Implications: This study can potentially alert managers to the increasing overlap between the CG and CSR agendas and the need to exert diligent systematic efforts on both fronts. CG and CSR share more in common than previously assumed, and this needs to be accounted for by practitioners. The research can also alert policy makers in developing countries to the need to increase the vigilance and capacity of the regulatory and judicial systems in the context of CG reform and to increase institutional pressures, particularly of the coercive and normative variety to enhance CSR adoption.

/pdf/corporate-governance-and-corporate-social-responsibility-45jinshenu.pdf

Corporate Governance and Corporate Social Responsibility Synergies and Interrelationships

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

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 report analyses the impact of failures and weaknesses in corporate governance on the financial crisis, including risk management systems and executive salaries. It concludes that the financial crisis can be to an important extent attributed to failures and weaknesses in corporate governance arrangements which did not serve their purpose to safeguard against excessive risk taking in a number of financial services companies.Accounting standards and regulatory requirements have also proved insufficient in some areas. Last but not least, remuneration systems have in a number of cases not been closely related to the strategy and risk appetite of the company and its longer term interests. The article also suggests that the importance of qualified board oversight and robust risk management is not limited to financial institutions. The remuneration of boards and senior management also remains a highly controversial issue in many OECD countries. The current turmoil suggests a need for the OECD to re-examine the adequacy of its corporate governance principles in these key areas.

/pdf/the-corporate-governance-lessons-from-the-financial-crisis-p0td6q6a3h.pdf

The corporate governance lessons from the financial crisis

The OECD Principles of Corporate Governance were revised in 2004 to respond to corporate governance developments including corporate scandals that further focused the minds of governments on improving corporate governance practices. Since they were first issued in 1999, the OECD Principles of Corporate Governance have gained worldwide recognition as an international benchmark for sound corporate governance. They are actively used by governments, regulators, investors, corporations and stakeholders in both OECD and non-OECD countries and have been adopted by the Financial Stability Forum as one of the Twelve Key Standards for Sound Financial Systems. The 2004 revision of the OECD Principles reflects not only the experience of OECD countries but also that of emerging and developing economies. This article shows how the revised Principles take into account recent lessons from non-OECD countries so that they continue to maintain their global relevance.

Grant Kirkpatrick

Papers

Corporate Governance Lessons from the Financial Crisis

The corporate governance lessons from the financial crisis

The Revised OECD Principles of Corporate Governance and their Relevance to Non-OECD Countries

The Revised OECD Principles of Corporate Governance and their Relevance to Non-OECD Countries