Ethical Reputation of Financial Institutions: Do Board Characteristics Matter?

Laura Baselga-Pascual (), Antonio Trujillo-Ponce, Emilia Vähämaa () and Sami Vähämaa
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Laura Baselga-Pascual: Pablo de Olavide University
Emilia Vähämaa: Hanken School of Economics

Journal of Business Ethics, 2018, vol. 148, issue 3, No 2, 489-510

Abstract: 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 (search for similar items in EconPapers)
JEL-codes: G01 G21 G23 G30 M14 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (20)

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DOI: 10.1007/s10551-015-2949-x

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