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http://ssrn.com/abstract=1511904
 
 

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When 'Good' Corporate Governance Makes 'Bad' (Financial) Firms: The Global Crisis and the Limits of Private Law


Nicholas Calcina Howson


University of Michigan Law School

November 17, 2009

Michigan Law Review, First Impressions, Vol. 108, p. 44, December 2009
U of Michigan Law & Economics, Olin Working Paper No. 09-024

Abstract:     
In the aftermath of the Global Financial Crisis, legislators, regulators and journalists have focused on "bad" corporate governance as one root of the evil visited on the global financial system, and "good" or "improved" corporate governance as one of the remedies for repair. This short writing - using BNP Paribas and AIG as examples - makes the perhaps counter-intuitive argument that, insofar as "good" corporate governance made directors and managers responsive to the shareholders' interest, it may have caused those same directors and managers to take on unsustainable risk so as to increase current profits and support the public stock price valuation. This means that "good" corporate governance is not really a solution to remedying or protecting against the next Crisis, and indicates why long-term, systemic risk-regarding, prudential regulation is.

Number of Pages in PDF File: 8

Keywords: corporate governance, financial sector, global financial crisis, prudential regulation, banks, financial institutions

JEL Classification: D23, F02, F30, G15, G18, G30, K22, K23, M14

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Date posted: November 24, 2009 ; Last revised: December 11, 2009

Suggested Citation

Howson, Nicholas Calcina, When 'Good' Corporate Governance Makes 'Bad' (Financial) Firms: The Global Crisis and the Limits of Private Law (November 17, 2009). Michigan Law Review, First Impressions, Vol. 108, p. 44, December 2009; U of Michigan Law & Economics, Olin Working Paper No. 09-024. Available at SSRN: http://ssrn.com/abstract=1511904

Contact Information

Nicholas Calcina Howson (Contact Author)
University of Michigan Law School ( email )
701 South State Street
3234 South Hall
Ann Arbor, MI 48109-3091
United States

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