Corporate governance and the market impact of the Financial Services Modernization act of 1999 on bank returns and trading volume

Pacini, Carl J.; Hillison, William A.; Marlett, David C.; Burgess, Deanna Oxender

doi:10.1007/bf02761542

Cited by 5 publications

(3 citation statements)

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“…The role of corporate governance in the banking industry has been examined e.g. in Caprio et al (2007), Cornett et al (2009), de Andres andVallelado (2008), Hanazaki and Horiuchi (2003), Jiraporn and Chintrakarn (2009), Laeven and Levine (2009), Macey and O'Hara (2003), Mishra and Nielsen (2000), Pacini et al (2005), Sierra et al (2006), and Webb Cooper (2009). Consistent with the literature on non-financial firms, these studies demonstrate that strong corporate governance has positive effects on the financial performance and stock market valuation of banks.…”

Section: Introductionmentioning

confidence: 57%

Did Good Corporate Governance Improve Bank Performance during the Financial Crisis?

2011

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This paper focuses on the effects of corporate governance on bank performance during the financial crisis of 2008. Using data on large publicly traded U.S. banks, we examine whether banks with stronger corporate governance mechanisms were associated with higher profitability and better stock market performance amidst the crisis. Our empirical findings on the effects of corporate governance on bank performance are mixed. Although the results suggest that banks with stronger corporate governance mechanisms were associated with higher profitability in 2008, our findings also indicate that strong governance may have had negative effects on stock market valuations of banks amidst the crisis. Nevertheless, we document that banks with strong corporate governance practices had substantially higher stock returns in the aftermath of the market meltdown, indicating that good governance may have mitigated the adverse influence of the crisis on bank credibility.

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Section: Introductionmentioning

confidence: 57%

Did Good Corporate Governance Improve Bank Performance during the Financial Crisis?

2011

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“…Previously, an extensive empirical literature has documented that banks with strong corporate governance mechanism are generally associated with better financial performance, higher firm valuation and higher stock returns (Caprio et al, 2007;Cornett et al, 2009;de Andres and Vallelado, 2008;Hanazaki and Horiuchi 2003;Jirapron and Chintrakarn, 2009;Laeven and Levine, 2009;Macey and O'Hara, 2003;Mishra and Nielsen, 2000;Pacini et al, 2005;Sierra et al, 2006;Webb Cooper, 2009). Yet, the existing literature has only partially investigated the relationship between governance and bank risk-taking, since several studies analyse a specific type of risk and governance dimensions, usually focusing on the United States.…”

Section: Corporate Governance and Bank Risk-taking During The Financimentioning

confidence: 99%

Strong boards, ownership concentration and EU banks’ systemic risk-taking: Evidence from the financial crisis

Battaglia

Gallo

2017

Journal of International Financial Markets, Institutions and Mo

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This is the accepted version of the paper.This version of the publication may differ from the final published version. Keywords: board composition; bank ownership; systemic risk; financial crisis JEL classification: G01; G21; G32 Permanent repository link IntroductionCorresponding authorThe role of corporate governance in banking has been highlighted by academics as well as by regulators and policy makers (see e.g. Basle Committee on Banking Supervision, 2010;Organization for Economic Co-operation and Development, 2010). Many academic studies emphasize how flaws in bank governance played a key role in the performance of banks during the crisis (Diamond and Rajan, 2009;Bebchuk and Spamann, 2010, Beltratti andStulz, 2012). Since the 2007, an increasing number of proposals and initiatives have attempted to identify and mitigate these flaws revealed by the financial crisis (Kirkpatrick, 2009) aiming to promote better corporate governance standards in banking, while recognizing the special nature of banks when compared to other firms. On the other hand, the financial crisis revealed the dramatic impact of excessive risktaking behaviour of banks on the global financial stability, especially in terms of underestimated consequences of unregulated systemic risk-taking. As the literature has widely investigated poor or weak corporate governance as well as the increasing systemic nature of the banking sector as major causes of the crisis, to the best of our knowledge there is still a limited understanding of the relationship between corporate governance characteristics and banks' incentive to become more expose to systemic risk. As suggested by de Andres and Vallelado (2008), the aim of banking regulators to reduce the runs and their systemic consequences on the stability of the system might come into conflict with the main purpose of shareholders which is to improve the shareholders value by also increasing risk-taking. Taking on risks and tail and systemic risks, in particular, may enhance bank performance in the short run (i.e. by increasing the leverage), but it can cause significant damage to the institution and the whole system when such risks materialize (i.e. fire sales "effects"). During the global financial crisis, European banks exposed themselves to tail and systemic risks in various ways. Among others, the most recent literature has highlighted how European banks' exposures to tail risks in the form of shadow banking activities were later transformed into severe losses on the balance sheets (Acharya et al., 2013: Arteta et al., 2013).An increase in systemic and tail risks by large banks could be supported by the implicit too-big-to fail guarantee and the reduced market discipline (Acharya et al.,2010). In fact, it could be difficult, both for outsiders and insiders, to distinguish between risk-taking activities that generate high returns and those that offer high returns as compensation for taking tail risk through complex and opaque activities (Ellul and Yerramilli, 2013). In this context, the presence of a s...

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“…To overcome the problem of non-normality of the sample abnormal returns distribution, a generalised least squares rank regression is used (Conover and Iman, 1981). Other financial research studies that use rank regression include Bamber and Cheon (1995), Guo et al (2004) and Pacini et al (2005). To operationalise the rank regression, the following is applied separately to each quantitative independent and dependent variable.…”

Section: Cross-sectional Regression Analysismentioning

confidence: 99%

Do resource consent announcements provide valuable information?

Wirth

Chi

Young

2011

Pacific Accounting Review

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Purpose -Investor access to timely, financial resource consent information is problematic, consequently the purpose of this paper is to investigate the economic importance of New Zealand resource consent announcements to the stock exchange. Design/methodology/approach -The authors apply event study methodology and cross-sectional rank regression using a sample of resource consent announcements from 1993 to 2007. Findings -Evidence of excess return volatility is found both on and before resource consent announcement dates. The results show that stock market reactions to resource consent announcements are positive for news of successes and negative for news of setbacks. Uncertainty associated with resource consent announcements appears to contribute to a delayed negative market response. In contrast, price reactions to announcements of resource consent success are immediate and significantly positive only when the news is concurrently disseminated via the media.Research limitations/implications -The findings imply that resource consent announcements are newsworthy and provide valuable information to the stock market regarding future regulatory compliance costs. Media dissemination is suggested to play an important role in the price-adjustment process for news of resource consent successes. Given the increasing prominence of environmental compliance issues, the authors suggest that more informative disclosures regarding the types of consent(s) sought, the dollar value of expected compliance costs, expected time to gain consent, project investment costs and consent conditions imposed, would better assist investors to assess the economic impact of firm capital expenditures. Originality/value -This study adds evidence to the literature on the role of environmental disclosures in disseminating information and reducing information asymmetry and offers suggestions to enhance the informativeness of environmental disseminations.

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Corporate governance and the market impact of the Financial Services Modernization act of 1999 on bank returns and trading volume

Cited by 5 publications

References 78 publications

Did Good Corporate Governance Improve Bank Performance during the Financial Crisis?

Did Good Corporate Governance Improve Bank Performance during the Financial Crisis?

Strong boards, ownership concentration and EU banks’ systemic risk-taking: Evidence from the financial crisis

Do resource consent announcements provide valuable information?

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