Corporate Governance of Banks and Financial Stability

European Banking Center Discussion Paper Series No. 2014-010

CentER Discussion Paper Series No. 2014-053

WBS Finance Group Research Paper No. 223

55 Pages Posted: 4 Sep 2014 Last revised: 26 Dec 2019

See all articles by Deniz Anginer

Deniz Anginer

Simon Fraser University (SFU)

Asli Demirgüç-Kunt

World Bank - Development Research Group; World Bank

Harry Huizinga

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR)

Kebin Ma

University of Warwick - Finance Group

Multiple version iconThere are 3 versions of this paper

Date Written: October 2017

Abstract

We find that shareholder-friendly corporate governance is associated with higher stand-alone and systemic risk in the banking sector. Specifically, shareholderfriendly corporate governance results in higher risk for larger banks and for banks that are located in countries with generous financial safety nets as banks try to shift risk towards taxpayers. We confirm our findings by comparing banks to non-financial firms and examining changes in bank risk around an exogenous regulatory change in governance. Our results underline the importance of the financial safety net and too-big-to-fail guarantees in thinking about corporate governance reforms at banks.

Keywords: Corporate governance; Bank insolvency; Systemic risk

JEL Classification: G21, M21

Suggested Citation

Anginer, Deniz and Demirgüç-Kunt, Asli and Huizinga, Harry and Ma, Kebin, Corporate Governance of Banks and Financial Stability (October 2017). European Banking Center Discussion Paper Series No. 2014-010, CentER Discussion Paper Series No. 2014-053, WBS Finance Group Research Paper No. 223, Available at SSRN: https://ssrn.com/abstract=2491490 or http://dx.doi.org/10.2139/ssrn.2491490

Deniz Anginer (Contact Author)

Simon Fraser University (SFU) ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada

Asli Demirgüç-Kunt

World Bank - Development Research Group ( email )

United States
202-473-7479 (Phone)
202-522-1155 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/ademirguckunt/

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Harry Huizinga

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2623 (Phone)
+31 13 466 3042 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Kebin Ma

University of Warwick - Finance Group ( email )

Gibbet Hill Rd
Coventry, CV4 7AL
Great Britain

HOME PAGE: http://www.kebinma.com

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