The Financial Crisis, Internal Corporate Governance, and the Performance of Publicly-Traded U.S. Bank Holding Companies

47 Pages Posted: 22 Sep 2009 Last revised: 26 Jan 2010

See all articles by Marcia Millon Cornett

Marcia Millon Cornett

Bentley University - Department of Finance

Jamie John McNutt

Southern Illinois University at Carbondale - Department of Finance

Hassan Tehranian

Boston College - Department of Finance

Date Written: January 22, 2009

Abstract

We look at internal corporate governance mechanisms and the performance of publicly-traded U.S. banks before and during the financial crisis. Obviously, bank performance decreases dramatically during the crisis. This decrease occurs for all bank size groups. However, the largest banks see the largest losses. We find several measures of corporate governance, particularly CEO pay-for-performance sensitivity, executive ownership, and affiliated director ownership, decrease significantly just before and during the crisis. Large banks experience the largest changes in corporate governance. Finally, we find stronger relations between corporate governance variable changes and 2008 stock market returns for large banks than for small banks.

Keywords: Corporate governance, financial performance, financial institutions

JEL Classification: G21, G30, G34

Suggested Citation

Cornett, Marcia Millon and McNutt, Jamie John and Tehranian, Hassan, The Financial Crisis, Internal Corporate Governance, and the Performance of Publicly-Traded U.S. Bank Holding Companies (January 22, 2009). Available at SSRN: https://ssrn.com/abstract=1476969 or http://dx.doi.org/10.2139/ssrn.1476969

Marcia Millon Cornett

Bentley University - Department of Finance ( email )

175 Forest Street
Waltham, MA 02154
United States

Jamie John McNutt

Southern Illinois University at Carbondale - Department of Finance ( email )

Mail Code 4626
Carbondale, IL 62901-4626
United States

Hassan Tehranian (Contact Author)

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States
617-552-3944 (Phone)
617-552-0431 (Fax)

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