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How Corporate Governance Mechanisms of Banks Have Changed After the 2007–08 Financial Crisis

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  • José L. Fernández Sánchez
  • María D. Odriozola Zamanillo
  • Manuel Luna

Abstract

Weak and ineffective corporate governance mechanisms in banks have been pointed out as the main factor that contributed to the 2007–08 financial crisis. The purpose of this study is to analyze empirically how the global financial crisis of 2007–08 has impacted on banks’ governance mechanisms, comparing the differences between the two most important models of corporate governance (the shareholder and stakeholder models), and if these changes are related to improvements in banks’ governance effectiveness. To carry out our analysis, we have used a sample with 46 of the largest commercial banks in the world and the period of analysis has covered from 2002 until 2015. Our findings show that Anglo‐American banks following the common law system (shareholder model) maintained their high level of governance effectiveness after the financial crises. On the other hand, Continental European banks following the civil law system (stakeholder model) increased their effectiveness after the crisis changing some practices in their corporate governance mechanisms (improvements in the structure and functioning of directors’ boards, improvements in the compensation policy for banks’ executives, as well as the implementation of CSR committees) what led to a convergence of both governance systems.

Suggested Citation

  • José L. Fernández Sánchez & María D. Odriozola Zamanillo & Manuel Luna, 2020. "How Corporate Governance Mechanisms of Banks Have Changed After the 2007–08 Financial Crisis," Global Policy, London School of Economics and Political Science, vol. 11(S1), pages 52-61, January.
    • Handle: RePEc:bla:glopol:v:11:y:2020:i:s1:p:52-61
    DOI: 10.1111/1758-5899.12748
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    Citations

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    Cited by:

    1. Rudolf Stanisław, 2021. "The impact of financial crises on changes to the models of corporate governance," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 57(3), pages 220-233, September.
    2. Serge Messomo Elle, 2022. "Corporate governance hierarchies and the performance of commercial banks in Cameroon," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2374-2391, September.
    3. Bhatia, Madhur & Gulati, Rachita, 2021. "Board governance and bank performance: A meta- analysis," Research in International Business and Finance, Elsevier, vol. 58(C).
    4. Caterina Di Tommaso & John Thornton, 2020. "Do ESG scores effect bank risk taking and value? Evidence from European banks," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(5), pages 2286-2298, September.
    5. Uyar, Ali & Wasiuzzaman, Shaista & Kuzey, Cemil & Karaman, Abdullah S., 2022. "Board structure and financial stability of financial firms: Do board policies and CEO duality matter?," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 47(C).
    6. Gulati, Rachita, 2022. "Bank ownership and governance quality in India: Evolution and detection of convergence clubs," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).
    7. Ma’aji, Muhammad M. & Anderson, Ediri O. & Colon, Christine G., 2021. "The Relevance of Good Corporate Governance Practices to Bank Performance," OSF Preprints 8jx2y, Center for Open Science.
    8. Yu-Lin Hsu & Ya-Ching Chu, 2023. "CSR committee and firm value during the COVID-19 pandemic," Economics and Business Letters, Oviedo University Press, vol. 12(2), pages 137-146.
    9. Ameni Tarchouna & Bilel Jarraya & Abdelfettah Bouri, 2022. "Do board characteristics and ownership structure matter for bank non-performing loans? Empirical evidence from US commercial banks," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 26(2), pages 479-518, June.

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