Does corporate governance mitigate bank diversification discount?

Hsin-Yu Liang, I-Ju Chen and Sheng-Syan Chen

International Review of Economics & Finance, 2016, vol. 45, issue C, 129-143

Abstract: This study investigates the relations between corporate governance structures, level of diversification, and excess value of the U.S. banks for 2003–2008. Our analysis produces several major findings. First, diversified banks are different from specialized banks in their board structure, monitoring function of audit committee, and the level of antitakeover provisions. Second, governance mechanisms are associated with bank diversification: as the level of diversification increases, board independence, institutional ownership, and managerial entrenchment decrease whereas the ratio of certified inside board directors significantly increases. Our results show that governance structure—particularly the leadership structure, the ratio of certified inside directors on the board, and the level of managerial entrenchment—plays an important role in determining the excess value of diversified banks. The findings provide some insights for bank policymakers, including the proper design or regulation of bank governance structures, which is critical to bank performance because regulation is no longer a substitute for bank governance.

Keywords: Bank diversification; Banking; Corporate governance (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056016300442
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:45:y:2016:i:c:p:129-143

DOI: 10.1016/j.iref.2016.05.008

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().