Download this Paper Open PDF in Browser

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

56 Pages Posted: 29 Oct 2010 Last revised: 13 Feb 2012

David H. Erkens

Georgetown University - McDonough School of Business

Mingyi Hung

Hong Kong University of Science & Technology (HKUST)

Pedro P. Matos

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

Date Written: January 15, 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.

Keywords: corporate governance, credit crisis, global financial institutions

JEL Classification: G2, G3, N2

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: https://ssrn.com/abstract=1397685 or http://dx.doi.org/10.2139/ssrn.1397685

David Hendrik Erkens (Contact Author)

Georgetown University - McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

HOME PAGE: http://explore.georgetown.edu/people/dhe11/

Mingyi Hung

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
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

Paper statistics

Downloads
9,123
Rank
395
Abstract Views
48,114