IDEAS home Printed from https://ideas.repec.org/a/sae/soueco/v4y2003i2p187-204.html
   My bibliography  Save this article

Financial Sector Reforms and Corporate Governance of Banks in Developing Economies: The Indian Experience

Author

Listed:
  • T.G. Arun

    (Institute for Development Policy and Management (IDPM), University of Manchester)

  • J.D. Turner

    (School of Management and Economics, Queens University, Belfast)

Abstract

The corporate governance of banks in developing economies is important, if for no other reason than the prevalence and severity of banking instability in many of these economies. In India, although the issues of corporate governance have not received much attention in the first generation of financial sector reforms, this issue will become a natural choice in the second set of reforms. The article finds that the partial divestment of Public Sector Banks (PSBs) has not brought about any significant changes in the quality of corporate governance mechanisms. This study also confirms the urgent need to review the size and composition of the PSB boards in India, particularly on adequate board-level representation for private shareholders when there is mixed ownership between the government and the private sector. The considerations of the Government of India (GOI) in making board-level appointments and the degree of transparency in the appointment process requires adequate attention. The issues of limited operational autonomy and inadequate representation for private shareholders in the boards could affect the recapitalization strategy of PSBs.

Suggested Citation

  • T.G. Arun & J.D. Turner, 2003. "Financial Sector Reforms and Corporate Governance of Banks in Developing Economies: The Indian Experience," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 4(2), pages 187-204, September.
    • Handle: RePEc:sae:soueco:v:4:y:2003:i:2:p:187-204
    DOI: 10.1177/139156140300400202
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/139156140300400202
    Download Restriction: no
    File URL: https://libkey.io/10.1177/139156140300400202?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 461-488, June.
    2. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    3. John M. Abowd & David S. Kaplan, 1999. "Executive Compensation: Six Questions That Need Answering," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 145-168, Fall.
    4. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    5. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Win), pages 14-23.
    6. Colin Mayer & Oren Sussman, 2001. "The Assessment: Finance, Law, and Growth," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 17(4), pages 457-466.
    7. T. G. Arun & F. I. Nixson, 2000. "The Disinvestment of Public Sector Enterprises: The Indian Experience," Oxford Development Studies, Taylor & Francis Journals, vol. 28(1), pages 19-32.
    8. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    9. Vijay Joshi, 1998. "India's economic reforms: Progress, problems, prospects," Oxford Development Studies, Taylor & Francis Journals, vol. 26(3), pages 333-350.
    10. Gregor Andrade & Mark Mitchell & Erik Stafford, 2001. "New Evidence and Perspectives on Mergers," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 103-120, Spring.
    11. Klein, Benjamin, 1974. "The Competitive Supply of Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 6(4), pages 423-453, November.
    12. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-264, April.
    13. Stiglitz, Joseph E, 1985. "Credit Markets and the Control of Capital," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(2), pages 133-152, May.
    14. Jairus Banaji, "undated". "Corporate Governance and the Indian Private Sector," QEH Working Papers qehwps73, Queen Elizabeth House, University of Oxford.
    15. Charles P. Oman, 2001. "Corporate Governance and National Development," OECD Development Centre Working Papers 180, OECD Publishing.
    16. Benjamin E. Hermalin & Michael S. Weisbach, 2003. "Boards of directors as an endogenously determined institution: a survey of the economic literature," Economic Policy Review, Federal Reserve Bank of New York, vol. 9(Apr), pages 7-26.
    17. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-558, June.
    2. Beck, Thorsten, 2003. "Stock markets, banks, and economic development:theory and evidence," EIB Papers 2/2003, European Investment Bank, Economics Department.
    3. Bushman, Robert M. & Smith, Abbie J., 2001. "Financial accounting information and corporate governance," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 237-333, December.
    4. Otten, J.A. & Heugens, P.P.M.A.R., 2007. "Extending the Managerial Power Theory of Executive Pay: A Cross National Test," ERIM Report Series Research in Management ERS-2007-090-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    5. Levine, Ross, 2005. "Finance and Growth: Theory and Evidence," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934, Elsevier.
    6. Naeem Tabassum & Satwinder Singh, 2020. "Corporate Governance and Organisational Performance," Springer Books, Springer, number 978-3-030-48527-6, February.
    7. Ndikumana, Leonce, 2005. "Financial development, financial structure, and domestic investment: International evidence," Journal of International Money and Finance, Elsevier, vol. 24(4), pages 651-673, June.
    8. Nenova, Tatiana, 2006. "Takeover laws and financial development," Policy Research Working Paper Series 4029, The World Bank.
    9. Trunin, Pavel (Трунин, Павел), 2015. "Analysis of the Level of Development of the Financial System in the Russian Federation [Анализ Уровня Развития Финансовой Системы В Российской Федерации]," Published Papers mn38, Russian Presidential Academy of National Economy and Public Administration.
    10. Aldrighi, Dante Mendes, 2003. "The Mechanisms of Corporate Governance in the United States: an Assessment," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 57(3), July.
    11. Szilagyi, P.G., 2007. "Corporate governance and the agency costs of debt and outside equity," Other publications TiSEM 9520d40a-224f-43a8-9bf9-b, Tilburg University, School of Economics and Management.
    12. Joshua Cave & Kausik Chaudhuri & Subal C. Kumbhakar, 2020. "Do banking sector and stock market development matter for economic growth?," Empirical Economics, Springer, vol. 59(4), pages 1513-1535, October.
    13. Ozkan, Aydin & Ozkan, Neslihan, 2004. "Corporate cash holdings: An empirical investigation of UK companies," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2103-2134, September.
    14. Frank M. Song & Li Li, 2012. "Bank Governance: Concepts and Measurements," Chapters, in: James R. Barth & Chen Lin & Clas Wihlborg (ed.), Research Handbook on International Banking and Governance, chapter 1, Edward Elgar Publishing.
    15. Anderson, Anne & Gupta, Parveen P., 2009. "A cross-country comparison of corporate governance and firm performance: Do financial structure and the legal system matter?," Journal of Contemporary Accounting and Economics, Elsevier, vol. 5(2), pages 61-79.
    16. Shkendije Himaj, 2014. "Corporate Governance in Banks and its Impact on Risk and Performance: Review of Literature on the Selected Governance Mechanisms," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 3(3), pages 53-85.
    17. Chong Ju Choi & Carla Millar & Brian Hilton, 2001. "Crisis and Recovery: The Relevance of the Path to Emergence of East Asian Capitalism," Global Business Review, International Management Institute, vol. 2(2), pages 145-165, August.
    18. Lehmann, Erik, 2018. "Corporate governance," UO Working Papers 01-18, University of Augsburg, Chair of Management and Organization.
    19. Mateev, Miroslav & Andonov, Kristiyan, 2018. "Do European bidders pay more in cross-border than in domestic acquisitions? New evidence from Continental Europe and the UK," Research in International Business and Finance, Elsevier, vol. 45(C), pages 529-556.
    20. Sautner, Zacharias & Weber, Martin, 2005. "Corporate governance and the design of stock option programs," Papers 05-32, Sonderforschungsbreich 504.

    More about this item

    Keywords

    (JEL: G21; G23; G28; G32; G34) Keywords: Corporate Governance; Divestment; Public Sector Banks.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:soueco:v:4:y:2003:i:2:p:187-204. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.ips.lk/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.