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Effective bank corporate governance: observations from the market crash and recommendations for policy

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  • Moorad Choudhry

Abstract

This paper considers the extent to which inadequate corporate governance was a contributory factor to the financial market crash. It examines the experience of selected failed banks, with emphasis on the corporate governance structure in place at each firm, and the background and expertise of the Board and Directors, and draws conclusions for future policy. We find that the nature and composition of Boards was not robust enough to provide independent direction. Their membership possessed insufficient expertise, and was not geared towards a long-term view of the bank’s development. Consequently many banks were drawn into a bull market spiral. The form of management direction contributed to this. Based on our conclusions we recommend that a number of bank governance measures be implemented, if necessary for imposition by regulatory fiat. These measures relate to the composition, structure and expertise of board members and non-executive directors.

Suggested Citation

  • Moorad Choudhry, 2011. "Effective bank corporate governance: observations from the market crash and recommendations for policy," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 1(1), pages 1-9.
    • Handle: RePEc:spt:apfiba:v:1:y:2011:i:1:f:1_1_9
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    Cited by:

    1. Rogers A. Akinsokeji, 2018. "Impact Of Board Structure On Firm Performance In The Nigerian Manufacturing Sector," Oradea Journal of Business and Economics, University of Oradea, Faculty of Economics, vol. 3(1), pages 56-65, March.
    2. Festić Mejra & Črepinko Polona & Bratina Borut, 2020. "The Importance of Corporate Governance of Banks Concerning the Ownership in the International Environment," Naše gospodarstvo/Our economy, Sciendo, vol. 66(4), pages 11-27, December.

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