Investment Bank Governance

62 Pages Posted: 24 Aug 2005 Last revised: 19 Feb 2009

See all articles by Oya Altinkilic

Oya Altinkilic

University of Maryland - Robert H. Smith School of Business

Robert S. Hansen

Tulane University - A.B. Freeman School of Business

Emir Hrnjic

National University of Singapore

Date Written: February 7, 2007

Abstract

Employing a new method of industry tests we examine investment bank governance. Most of the findings reject the view that banks are governed suboptimally over a sample period from 1990 through 2003. CEO pay is large and significantly sensitive to stock price performance, and stock price performance often outperforms the market. Results are consistent with bank directors being reputable, independent, and in control of their committees. Bank management is disciplined by pressure from a number of competitive product markets and from a vigorous market for bank control. No evidence exists that unusual governance qualities that could be unique to investment banking are indications of poor governance performance. The evidence agrees with the view that investment banks choose optimal governance.

Keywords: Boards of directors, board size, board composition, bond offerings, CEOs, commercial banks, comparative corporate governance, corporate control, corporate governance, directorships, endogeneity, executive compensation, Glass-Steagall, initial public offerings, investment bankers, investment banking

JEL Classification: G15, G18, G24, G32, G34, G38, J33

Suggested Citation

Altinkilic, Oya and Hansen, Robert S. and Hrnjic, Emir, Investment Bank Governance (February 7, 2007). AFA 2007 Chicago Meetings Paper, Available at SSRN: https://ssrn.com/abstract=785544 or http://dx.doi.org/10.2139/ssrn.785544

Oya Altinkilic

University of Maryland - Robert H. Smith School of Business ( email )

4426 Van Munching Hall
Department of Finance
College Park, MD 20742
United States

Robert S. Hansen (Contact Author)

Tulane University - A.B. Freeman School of Business ( email )

Goldring/Woldenberg Hall
7 McAllister Blvd.
New Orleans, LA 70118
United States
504-865-5624 (Phone)

Emir Hrnjic

National University of Singapore ( email )

1 Business Link
Singapore, 117592
Singapore
+65 6516 7824 (Phone)

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