Cluster Analysis of Governance Practices in Banks in Developed Countries
Posted: 18 Aug 2014
Date Written: August 17, 2014
Abstract
This study suggests classifying thirty banks from four countries on the basis of their governance practices through a cluster analysis. Banks’ membership in countries is not enough for them to explain the proximity of the governance practices between banking industries. Governance mechanisms convergence of thirty banks from four countries in 2009 is analyzed through a metric consistent with this approach. Bringing banks together according to the mechanism of the directors' compensation seems more appropriate to identify the similarities in the behavior. This will lead us to classify banks into three categories: (i) the first consists of the banks that award a very high incentive pay to their CEO, (ii) the second group provides a high compensation to the CEO and (iii) the third category gives a relatively low compensation to their CEO.
Keywords: Board of Directors, CEO compensation, Bank, Cluster analysis
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