← Search

Journal of Financial Economics Vol. 130 No. 2 2018

Corporate governance of banks and financial stability

Deniz Anginer1; Asli Demirgüç-Kunt; Harry Huizinga2,3; Kebin Ma4

1 World Bank · 2 Tilburg University · 3 Centre for Economic Policy Research · 4 University of Warwick

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.

DOI
10.1016/j.jfineco.2018.06.011
Volume
130
Issue
2
Pages
327-346
Language
en
Sources
crossref bibtex:phds-export.bib openalex

Cite