Abstract

http://ssrn.com/abstract=1397685
 
 

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Corporate Governance in the 2007-2008 Financial Crisis: Evidence from Financial Institutions Worldwide


David H. Erkens


University of Southern California - Leventhal School of Accounting

Mingyi Hung


The Hong Kong University of Science and Technology & University of Southern California

Pedro P. Matos


University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)

January 15, 2012

Journal of Corporate Finance, Vol. 18, 2012

Abstract:     
This paper investigates the influence of corporate governance on financial firms’ performance during the 2007-2008 financial crisis. Using a unique dataset of 296 financial firms from 30 countries that were at the center of the crisis, we find that firms with more independent boards and higher institutional ownership experienced worse stock returns during the crisis period. Further exploration suggests that this is because (1) firms with higher institutional ownership took more risk prior to the crisis, which resulted in larger shareholder losses during the crisis period, and (2) firms with more independent boards raised more equity capital during the crisis, which led to a wealth transfer from existing shareholders to debtholders. Overall, our findings add to the literature by examining the corporate governance determinants of financial firms’ performance during the 2007-2008 crisis.

Number of Pages in PDF File: 56

Keywords: corporate governance, credit crisis, global financial institutions

JEL Classification: G2, G3, N2

Accepted Paper Series


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Date posted: October 29, 2010 ; Last revised: February 13, 2012

Suggested Citation

Erkens, David H. and Hung, Mingyi and Matos, Pedro P., Corporate Governance in the 2007-2008 Financial Crisis: Evidence from Financial Institutions Worldwide (January 15, 2012). Journal of Corporate Finance, Vol. 18, 2012. Available at SSRN: http://ssrn.com/abstract=1397685 or http://dx.doi.org/10.2139/ssrn.1397685

Contact Information

David Hendrik Erkens (Contact Author)
University of Southern California - Leventhal School of Accounting ( email )
Los Angeles, CA 90089-0441
United States
(213)740-9318 (Phone)
Mingyi Hung
The Hong Kong University of Science and Technology & University of Southern California ( email )
Hong Kong
Pedro P. Matos
University of Virginia - Darden School of Business ( email )
University of Virginia
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
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