Corporate Governance Failures as a Reason for UK Banking Crisis

Abstract:     
The present research paper aims to explore the corporate governance failures which acted as a reason for the crisis of 2008 and examine the possibility of creation of more effective corporate governance model by convergence. For the purpose of clarity and efficiency of the research, it focuses mainly on information regarding banking crisis and reform of corporate regulations in United Kingdom. General information is given for observation of global concerns on financial crisis and various corporate governance models.

The first part of this document illustrates the failures of corporate governance mechanisms in banking and financial sector of the United Kingdom which in a manner forced the banking crisis in the country. The evidence shows that the corporate governance issues as risk management, remuneration, shareholder activism and board qualifications in a financial sector were not resistant and effective as to the risky operations which were conducted by the financial sector of the country in a usual basis. In the second part of this document the actions of the UK government in a form of various improvements and reforms in regard of corporate governance mechanisms are presented and reviewed by following the arguments regarding the effectiveness of new regulations and their maturity as for the post crisis measures. Finally, the third part of the paper contains my personal hypothesis which is based on the convergence theory of various scholars and the hypothesis present idea of creation of more effective and crisis-resistant model of corporate governance by convergence. I argue that even though the improvements of corporate governance models through adopting models from foreign jurisdictions is the complicated process, it should be implemented so in order to avoid some factors which can cause negative effects, and combine the positive functions of the main corporate models.

Number of Pages in PDF File: 33

Keywords: corporate governance, gorporate governance failures, global financial crisis, UK banking crisis, corporate governance reforms, convergence, convergence and crisis, convergence after the crisis

JEL Classification: G32, G33, G35, G38, K23

working papers series