Reforms in Thai bank governance: The aftermath of the Asian financial crisis

Pathan, Shams; Skully, Michael T.; Wickramanayake, Jayasinghe

doi:10.1016/j.irfa.2006.05.002

Cited by 31 publications

(16 citation statements)

References 32 publications

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“…Pathan et al (2008) confirm that much of empirical models results corporate governance, performance and risk behaviour in corporate firms are also applicable to banks. Banking governance can be either through internal mechanism (board of directors) or external mechanism (banking regulation and supervision, ownership structure…).…”

Section: Introductionsupporting

confidence: 69%

Board Characteristics, Performance and Risk Taking Behaviour in Tunisian Banks

Rachdi¹,

Ameur²

2011

IJBM

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The existing literature provides conflicting views of the relationship among board characteristics; performance (Return on Assets and Return on Equity) and bank risk taking (Z-score). The relation between characteristics of corporate boards, firm performance and risk taking continues to be a fundamental issue in the corporate governance literature. Findings of this literature are often inconclusive. The main contribution of this study is an analysis of how board characteristics affect performance and incentives to take risk in banking industry. We explore this relationship by using both generalized least square (GLS) random effect (RE) and generalized method of moments (GMM) system approaches. The empirical analysis based on a sample of 11 large Tunisian commercial banks during 1997-2006, reports the following robust results: a small bank board is associated with more performance and with more bank risk-taking, the presence of independent directors within the board of directors affects negatively the performance, but has no significant effect on the risk-taking, a lower CEO ownership is associated with lower performance in Tunisian banks, banks with high charter value are associated with lower ROA and ROE and more bank risk and the small size banks institutions appear to assume lower risks. Our results support the idea, commonly accepted, that bank board structure is a determinant factor for bank performance and bank risk taking.

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Section: Introductionsupporting

confidence: 69%

Board Characteristics, Performance and Risk Taking Behaviour in Tunisian Banks

Rachdi¹,

Ameur²

2011

IJBM

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“…Investors appear to perceive that bank boards with substantial independent director representation make better decisions and are more likely to control the damage from a financial crisis. For example, Pathan, Skully, and Wickramanayake (2008) find that improved financial institution governance is related to stock returns during a financial crisis. Cornett, Marcus, and Tehranian (2008) also note a more independent board is positively related to crisis performance of banks.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

Committee Independence and Financial Institution Performance during the 2007-08 Credit Crunch: Evidence from a Multi-country Study

Yeh

Chung

Liu

2011

Corporate Governance: An International Review

113

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Manuscript Type: EmpiricalResearch Question/Issue: Using the data of the 20 largest financial institutions from G8 countries, we explore whether the performance is higher for financial institutions with more independent directors on different committees during the 2007-08 financial crisis. We also examine the moderating effect of a country-level civil law dummy and firm-level excessive risk-taking behaviors on the independence-performance relationships. Research Findings/Insights: The empirical evidence shows that the performance during the crisis period is higher for financial institutions with more independent directors on auditing and risk committees. The influence of committee independence on the performance is particularly stronger for civil law countries. In addition, the independenceperformance relationships are more significant in financial institutions with excessive risk-taking behaviors. Theoretical/Academic Implications: Our findings complement existing works to partially resolve the independenceperformance relationship controversies by exploring the independence of different committees. The moderating effects of civil law countries and excessive risk-taking firms further address the governance environment's role in the effectiveness of director independence. Practitioner/Policy Implications: Our results provide important policy implications for financial institutions. The regulation authorities should enhance regulation compliance to improve director independence, particularly for auditing and risk committees in banking industry. Independent directors in the banking industry are supposed to put more emphasis on excessive risk-taking behaviors, as the financial institutions profit from risk-bearing earnings.

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“…Accordingly, Pathan et al (2007) showed that the Thai bank sector returns lead the overall Thai stock market returns-especially after the crisis.…”

Section: Thai Commercial Banksmentioning

confidence: 99%