Did Good Corporate Governance Improve Bank Performance during the Financial Crisis?

    Authors

    E. Peni;S. Vahamaa

    Comments

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    Abbreviated Journal Title

    J. Financ. Serv. Res.

    Keywords

    Corporate governance; Bank performance; Financial crisis; EQUITY PRICES; RISK-TAKING; Business, Finance

    Abstract

    This paper focuses on the effects of corporate governance on bank performance during the financial crisis of 2008. Using data on large publicly traded U.S. banks, we examine whether banks with stronger corporate governance mechanisms were associated with higher profitability and better stock market performance amidst the crisis. Our empirical findings on the effects of corporate governance on bank performance are mixed. Although the results suggest that banks with stronger corporate governance mechanisms were associated with higher profitability in 2008, our findings also indicate that strong governance may have had negative effects on stock market valuations of banks amidst the crisis. Nevertheless, we document that banks with strong corporate governance practices had substantially higher stock returns in the aftermath of the market meltdown, indicating that good governance may have mitigated the adverse influence of the crisis on bank credibility.

    Journal Title

    Journal of Financial Services Research

    Volume

    41

    Issue/Number

    1-2

    Publication Date

    1-1-2012

    Document Type

    Article

    Language

    English

    First Page

    19

    Last Page

    35

    WOS Identifier

    WOS:000300682700002

    ISSN

    0920-8550

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