Corporate governance and performance of financial institutions

Andrey Zagorchev and Lei Gao

Journal of Economics and Business, 2015, vol. 82, issue C, 17-41

Abstract: We examine how corporate governance affects financial institutions in the U.S. between 2002 and 2009. First, we find that better governance is negatively related to excessive risk-taking and positively related to the performance of U.S. financial institutions. Specifically, sound overall and specific governance practices are associated with less total non-performing assets, less real estate non-performing assets, and higher Tobin's Q. Second, we show that better governance contributes to higher provisions and reserves for loan/asset losses of financial institutions, supporting the income smoothing hypothesis. Moreover, the results are similar without the financial crisis period, and different robustness checks confirm the analysis.

Keywords: Corporate governance; Financial institutions; Performance; Income smoothing; Financial crisis (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:82:y:2015:i:c:p:17-41

DOI: 10.1016/j.jeconbus.2015.04.004

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