Howdivident policy impact on power market of banks5 answersBank dividend policy and market power are intertwined factors in the banking sector. Research indicates that market power, as measured by the Lerner Index, inversely affects dividend payment decisions in commercial banks, although this impact is statistically insignificant. Furthermore, the relationship between market power and bank lending reveals a U-shaped pattern, with countries having stringent regulatory policies exhibiting higher thresholds of market power compared to those with low regulatory policies. Additionally, the impact of bank market power on monetary policy transmission to borrowers is significant, comparable to the effect of bank capital regulation, especially when the federal funds rate drops below a certain threshold. These findings highlight the complex interplay between dividend policies and market power dynamics in the banking industry.
How does corporate governance affect bank performance?5 answersCorporate governance has a significant impact on bank performance. The size of the board and audit committees positively influence profitability and productivity, but decrease technical efficiency. The number of board meetings and audit committee meetings also contribute to better performance and lower risk. Additionally, corporate governance mechanisms differentiate banks' practices and are considered essential for financial sustainability. Furthermore, corporate governance positively moderates the relationship between bank ownership and business performance, indicating its favorable effect on company performance. Moreover, banks with stronger corporate governance practices, such as higher shareholding of institutional investors and more independent directors, offer more innovative financial services, leading to higher profitability and value. Overall, effective corporate governance plays a crucial role in enhancing bank performance and financial stability.
What are the benefits of corporate governance in banking sector?4 answersCorporate governance in the banking sector provides several benefits. Firstly, it enhances financial innovation and performance. Banks with strong corporate governance practices, such as a higher number of directors with finance or accounting backgrounds, higher attendance rates of directors, and a higher ratio of independent directors, are more likely to provide cutting-edge financial services and experience increased profitability and value. Secondly, corporate governance influences risk-taking behavior in banks. CEOs who started their careers during recessions tend to take less risk and implement conservative bank policies, resulting in superior performance during financial crises. Thirdly, board structure, audit committee size, and ownership structure significantly impact bank performance. Larger boards and audit committees improve profitability and productivity, while gender diversity indicators may deteriorate performance. Ownership structure improves earnings per share and technical efficiency. Finally, good corporate governance practices, such as board size, independence, and leverage, positively affect bank performance, leading to increased return on assets.
What are the benefits of implementing corporate governance in the banking sector?5 answersImplementing corporate governance in the banking sector has several benefits. It helps to specify the distribution of roles, responsibilities, and resources among stakeholders, leading to a more stable and sustainable financial system. Good corporate governance mechanisms, such as transparency, privacy, legislations, and clarity of procedures, enhance the efficiency of banks and balance the conflict of interest among stakeholders. Effective corporate governance mechanisms also protect the rights of stakeholders and ensure the reliability and relevance of financial information, thereby improving the quality of financial reporting in the banking industry. Furthermore, strong governance practices in banks are essential for achieving and maintaining a higher level of public confidence in the banking system. Additionally, implementing corporate governance variables, such as having a large board with expertise, non-executive board members, and separation of CEO-board chair roles, can improve the quality of bank loan portfolios. Overall, corporate governance in the banking sector leads to better financial outcomes, stability, accountability, and transparency.
WHAT IS Power finance corporation?5 answersPower finance corporation refers to the practice of using sophisticated financial engineering techniques in the power industry to enhance corporate earnings and shareholder value. Project sponsors in the competitive power market blend power purchase agreements (PPAs) with tolling and merchant arrangements on the equity side, while on the debt side, they utilize highly structured financings involving miniperms, gencos, bonds, and project lease structures. This approach allows for innovative combinations of financing methods to support the development and operation of generating plants.Tolling agreements are a specific type of contract used in the North American power industry, where a company like Powerex Corp. converts gas into electricity through short-term contracts with generators. Powerex may seek longer-term, more complex tolling contracts to further its growth objectives.
How does corporate governance impact financial performance?5 answersCorporate governance has a significant impact on financial performance. The indicators of corporate governance, such as board role and composition, transparency and disclosure, audit and compliance, and risk management, positively influence the financial performance of financial institutions. Establishing and improving corporate governance mechanisms is crucial for enhancing the market competitiveness and preventing financial crises. Prior to the financial crisis of 2008, there was a positive association between corporate governance and firm performance, as measured by Tobin's q. Higher corporate governance also led to an increase in cash dividends. However, during the financial crisis, the relationship between corporate governance and firm performance varied. Better-governed companies had a higher return on assets, but this was not observed when measured by Tobin's q. Additionally, companies with better corporate governance paid dividends less generously during the crisis. Overall, better corporate governance practices and disclosure are believed to lead to superior financial performance.