Title

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

Authors

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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