Corporate Governance, Opaque Bank Activities, and Risk/Return Efficiency: Pre- and Post-Crisis Evidence from Turkey
53 Pages Posted: 31 Jul 2011 Last revised: 4 May 2013
There are 2 versions of this paper
Corporate Governance, Opaque Bank Activities, and Risk/Return Efficiency: Pre- and Post-Crisis Evidence from Turkey
Corporate Governance, Opaque Bank Activities, and Risk/Return Efficiency: Pre- and Post-Crisis Evidence from Turkey
Date Written: July 27, 2011
Abstract
Does better corporate governance unambiguously improve the risk/return efficiency of banks? Or does either a re-orientation of banks' revenue mix towards more opaque products, an economic downturn, or tighter supervision create off-setting or reinforcing effects? The authors relate bank efficiency to shortfalls from a stochastic risk/return frontier. They analyze how internal governance mechanisms (CEO duality, board experience, political connections, and education profile) and external governance mechanisms (discipline exerted by shareholders, depositors, or skilled employees) determine efficiency in a sample of Turkish banks. The 2000 financial crisis was a wake-up call for bank efficiency and corporate governance. As a result, better corporate governance mechanisms have been able to improve risk/return efficiency when the economic, regulatory, and supervisory environments are more stable and bank products are more complex.
Keywords: corporate governance, bank risk, noninterest income, crisis, frontier
JEL Classification: G01, G21, G28
Suggested Citation: Suggested Citation
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