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Corporate Governance in Banking: A Conceptual Framework

28 Pages Posted: 11 Dec 2000  

Penny Ciancanelli

University of Strathclyde - Department of Accounting and Finance

José Antonio Reyes-Gonzalez

University of Strathclyde - Department of Accounting and Finance

Date Written: undated

Abstract

In the wake of far reaching financial system reforms, almost three fourths of the member countries of the IMF experienced significant episodes of systemic crisis and associated bank failures. Notably absent in the ensuing debates on the correlation between financial system reforms and systemic crisis was discussion of corporate governance in the affected banks and the role it may have played in the provoking financial crisis.

Consideration of corporate governance in banks is, however, apparently easier said than done. While there is a great deal of empirical research on corporate governance, very little of it concerns the behaviour of owners and managers of banks; all of it assumes that banks conform to the concept of the firm used in Agency Theory.

The aim of this paper is to demonstrate the limitations of that assumption and to propose an alternative conceptual framework more suitable to its analysis. We argue that commercial banks are distinguished by a more complex structure of information asymmetry arising from the presence of regulation. We show how regulation limits the power of markets to discipline the bank, its owners and its managers and argue that regulation must be seen as an external force, which alters the parameters of governance in banks.

Keywords: Corporate governance, banks, regulation, agency theory

Suggested Citation

Ciancanelli, Penny and Reyes-Gonzalez, José Antonio, Corporate Governance in Banking: A Conceptual Framework (undated). Available at SSRN: https://ssrn.com/abstract=253714 or http://dx.doi.org/10.2139/ssrn.253714

Penny Ciancanelli (Contact Author)

University of Strathclyde - Department of Accounting and Finance ( email )

Curran Building
100 Cathedral Street
Glasgow G4 0LN
United Kingdom
(+44) 0141 548 3896 (Phone)
(+44) 0141 552 3547 (Fax)

José Reyes-Gonzalez

University of Strathclyde - Department of Accounting and Finance ( email )

Curran Building
100 Cathedral Street
Glasgow G4 0LN
United Kingdom

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