The effect of corporate governance on the performance of US investment banks

Mamatzakis, E and Bermpei, T ORCID: https://orcid.org/0000-0003-3790-7338, 2015. The effect of corporate governance on the performance of US investment banks. Financial Markets, Institutions & Instruments, 24 (2-3), pp. 191-239. ISSN 0963-8008

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Abstract

This paper focuses on the impact of the corporate governance, using a plethora of measures, on the performance of the US investment banks over the 2000-2012 period. This time period offers a unique set of information, related to the credit crunch, that we model using a dynamic panel threshold analysis to reveal new insights into the relationship between corporate governance and bank performance. Results show that the board size asserts a negative effect on performance consistent with the ‘agency cost’ hypothesis, particularly for banks with board size higher than ten members. Threshold analysis reveals that in the post-crisis period most of investment banks opt for boards with less than ten members, aiming to decrease agency conflicts that large boards suffer from. We also find a negative association between the operational complexity and performance. Moreover, the CEO power asserts a positive effect on performance consistent with the ‘stewardship’ hypothesis. In addition, an increase in the bank ownership held by the board has a negative impact on performance for banks below a certain threshold. On the other hand, for banks with board ownership above the threshold value this effect turns positive, indicating an alignment between shareholders’ and managers’ incentives.

Item Type:	Journal article
Description:	Special issue: Surrey-Fordham Conference on 'Banking, Finance, Money and Institutions: the Post Crisis Era'.
Publication Title:	Financial Markets, Institutions & Instruments
Creators:	Mamatzakis, E. and Bermpei, T.
Publisher:	Wiley
Date:	May 2015
Volume:	24
Number:	2-3
ISSN:	0963-8008
Identifiers:	Number Type 10.1111/fmii.12028 DOI
Divisions:	Schools > Nottingham Business School
Record created by:	EPrints Services
Date Added:	09 Oct 2015 11:00
Last Modified:	09 Jun 2017 13:46
URI:	https://irep.ntu.ac.uk/id/eprint/21266

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