Ethical Reputation of Financial Institutions: Do Board Characteristics Matter?

56 Pages Posted: 21 Sep 2014 Last revised: 26 Jun 2020

See all articles by Laura Baselga-Pascual

Laura Baselga-Pascual

University of Deusto - Deusto Business School

Antonio Trujillo‐Ponce

Universidad Pablo de Olavide - Department of Financial Economics & Accounting

Emilia Vähämaa

Hanken School of Economics

Sami Vähämaa

University of Vaasa

Date Written: August 25, 2015

Abstract

This paper examines the association between board characteristics and the ethical reputation of financial institutions. Given the pivotal governance role of the board of directors and the value-relevance of ethical corporate behavior, we postulate a positive relationship between ethical reputation and board features that foster more effective monitoring and oversight. Using a sample of large financial institutions from 13 different countries, we run several alternative panel regressions of ethical reputation on board characteristics and firm-specific controls. Our results demonstrate that the ethical reputation of financial institutions is positively associated with board size, gender diversity, and CEO duality, while being negatively related to the busyness of the board members and a composite index reflecting poor monitoring. Nevertheless, inconsistent with our hypothesis, we also document that financial institutions with less frequent board meetings have better ethical reputation. Overall, our empirical findings suggest that stronger board oversight may promote ethical behavior in the financial industry.

Keywords: Ethical Reputation, Board of Directors, Board Characteristics, Board Monitoring, Corporate Governance, Financial Institutions

JEL Classification: G01, G21, G23, G30, M14

Suggested Citation

Baselga-Pascual, Laura and Trujillo-Ponce, Antonio and Vähämaa, Emilia and Vähämaa, Sami, Ethical Reputation of Financial Institutions: Do Board Characteristics Matter? (August 25, 2015). Journal of Business Ethics, 148 (3), 489-510., Available at SSRN: https://ssrn.com/abstract=2498682 or http://dx.doi.org/10.2139/ssrn.2498682

Laura Baselga-Pascual

University of Deusto - Deusto Business School ( email )

Camino de Mundaiz, 50
San Sebastian, 20012
Spain

Antonio Trujillo-Ponce

Universidad Pablo de Olavide - Department of Financial Economics & Accounting ( email )

Ctra. Utrera, Km.1
Sevilla, 41013
Spain

HOME PAGE: http://https://www.upo.es/investiga/banef/

Emilia Vähämaa

Hanken School of Economics ( email )

PB 287
Helsinki, Vaasa 65101
Finland

Sami Vähämaa (Contact Author)

University of Vaasa ( email )

P.O. Box 700
Vaasa, FI-65101
Finland
+358 29 449 8455 (Phone)

HOME PAGE: http://www.univaasa.fi/~sami

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