Italian banking regulation and the legal obstacles to corporate governance convergence

2019 ◽  
Vol 24 (5) ◽  
pp. 493-514 ◽  
Author(s):  
Olivier Butzbach ◽  
Gennaro Rotondo
Keyword(s):  
Corporate Governance ◽  
Banking Sector ◽  
Banking Regulation ◽  
Point Of View ◽  
Sources Of Resistance ◽  
Shareholder Primacy ◽  
Italian Case ◽  
Governance Practices ◽  
Anglo American ◽  
Many Sources

An ongoing dispute in comparative corporate governance studies concerns the extent to which cross-country convergence towards, essentially, the shareholder primacy view is occurring. While some scholars, especially legal scholars and economists, have predicted (and sometimes advocated) a convergence of corporate governance practices towards the Anglo-American model of (seemingly) shareholder primacy, others sharply disagree and point to the persistence of stakeholder-oriented governance in many countries. Banking, from the point of view of corporate governance convergence, is an interesting industry, for at least two reasons: (i) banks are peculiar types of business organizations, entailing specific governance rules in most systems; (ii) banks are (monetary) financial intermediaries more and more active on capital markets, and thus more and more exposed to the isomorphic pressures generated on corporate governance by those markets. Thus, predictions on the convergence or divergence of banks’ corporate governance are not easy to make. The present paper aims to contribute to the scholarly dispute by analysing the Italian case, which has seen, over the past 30 years or so, an apparently unfettered process of transformation of banks’ governance and ownership towards the shareholder primacy model – a process epitomized by the recent reforms of the country’s cooperative banking sector. ‘Apparently’, because a closer look at the legal and regulatory bases of banks’ corporate governance actually shows many sources of divergence from the shareholder primacy model. Thus, the contribution proposed by the present study is twofold: first, it extends the ‘convergence’ discussion to the banking industry, where specific dynamics may help us better ‘test’ the hypotheses developed in the ‘convergence’ debate; second, it emphasizes alternative divergent patterns to those normally identified in the literature, where divergent ‘practice’ is often opposed to converging laws. Here, the sources of resistance to convergence are found in law itself.

DHFL Meltdown: The Corporate Governance Lapses

2021 ◽  
pp. 097282012199882
Author(s):  
Daitri Tiwary ◽  
Arunaditya Sahay
Keyword(s):  
Corporate Governance ◽  
Banking Sector ◽  
Housing Finance ◽  
Shadow Banking ◽  
Share Prices ◽  
A Value ◽  
Governance Practices ◽  
The Board Of Directors ◽  
Company Sector ◽  
Financial Company

India’s non-banking financial institutions (NBFIs), broadly constituting the less-regulated shadow banking sector, have been plagued with scams, triggering a domino effect in the Indian money market. Major corporate governance issues were highlighted in NBFIs with the unfurling of the ILF&S fraud; it virtually created a sub-prime crisis. In such a scenario, where the shadow banking sector was subject to change in regulations to ensure vigilance, corporate governance lapses had again led to the meltdown of Kapil Wadhawan led Dewan Housing Finance Limited (DHFL). Registering a net profit growth of 25% in the third quarter of financial year 2017, DHFL was one of India’s leading housing finance companies with a value of whopping ₹1.01 trillion as its asset under management (AUM). The company had nose-dived from its coveted position, suffering a loss of ₹22.23 million for the last quarter of the financial year 2018–2019. The company’s credit ratings of commercial papers and non-convertible debentures were downgraded; non-payment of interests led to enforcement of resolution plan, with the board of directors acceding to nationalized banks. The company’s reputation had crashed with its share prices, amidst allegations of lookout notice issued for its promoters for siphoning funds through shell companies. The case describes the oversights and negligence of DHFL in terms of corporate governance practices in the context of the NBFC (non-banking financial company) sector. The jury is out to evaluate whether Wadhawan had followed the rules of corporate governance in letter and spirit, or the tightening noose of regulations and market sentiments around the ‘shadow banking’ sector of India spelt doom for DHFL.

scholarly journals Corporate governance practices in the banking sector of Bangladesh: do they really matter?

2017 ◽  
Vol 12 (1) ◽  
pp. 27-35 ◽  
Author(s):  
Samiul Parvez Ahmed ◽  
Rahatul Zannat ◽  
Sarwar Uddin Ahmed
Keyword(s):  
Corporate Governance ◽  
Commercial Banks ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Stock Exchange ◽  
Financial Sector ◽  
Jel Classification ◽  
Data Availability ◽  
Time Period ◽  
Governance Practices

A well governed institution is expected to use its resources optimally and, thus, perform more efficiently and contribute positively to economic development of a nation. However, often, it can be seen that poor management of the stakeholders leads to less than optimal strategic directions for an institution. Due to recent global financial crisis and rising issues of the Bangladeshi banking sector, corporate governance is one of the factors that have gained considerable attention. Recent drive of the governance issues of the banking sector of Bangladesh is expected to bring positive change in the financial sector and, hence, it is crucial to assess whether complying with governance codes leads to desired outcome or not. Specifically, the main purpose of this study is to examine the relationship between performances of commercial banks with corporate governance factor along with some internal and macroeconomic variables. Thus, the listed commercial banks in the Dhaka Stock Exchange (DSE) of Bangladesh were considered for the study. Subsequently, considering data availability of the time period (2011-2014), 29 listed commercial banks in the DSE have been considered and, hence, Ordinary Least Squared (OLS) regression models were used through Eviews 8.0 for analyzing the data. Though the study shows a positive relation between corporate governance and performances of banks, the statistical insignificance of the relation raises concern regarding various issues of corporate governance in the financial sector of Bangladesh. Keywords: corporate governance, financial institutions, performances of commercial banks. JEL Classification: G21, G30, G38, G39, O16

scholarly journals Transplantation of Anglo-American corporate governance and its impact on financial market growth: a comparative analysis of nineteen developing countries 1995-2014

2019 ◽  
Vol 19 (5) ◽  
pp. 884-922 ◽  
Author(s):  
Navajyoti Samanta
Keyword(s):  
Developing Countries ◽  
Corporate Governance ◽  
Financial Market ◽  
Research Paper ◽  
Financial Economic ◽  
Multilevel Regression ◽  
Shareholder Primacy ◽  
Content Type ◽  
Market Growth ◽  
Anglo American

Purpose Since the late 1990s, developing countries have been encouraged by international financial organisations to adopt a shareholder primacy corporate governance model. It was anticipated that in an increasingly globalised financial market, countries which introduced corporate governance practices that favour investors would gain a comparative advantage and attract more capital leading to financial market growth. This paper aims to empirically test this hypothesis. Design/methodology/approach The present research paper quantitatively investigates whether adopting shareholder primacy corporate governance norms has had any impact on the growth of the financial market, focusing on nineteen developing countries between 1995 and 2014. Time series indices are prepared for corporate governance regulations, financial market development along with three control indices. Then a lagged multilevel regression between these indices is used to investigate the strength of causality between the adoption of pro-shareholder corporate governance and the growth of the financial market. Findings The research paper finds that shifting towards a shareholder primacy model in corporate governance has a very small effect on growth of financial market in developing countries. Overall the financial, economic and technological controls have much more impact on the growth of financial markets. Originality/value This paper conclusively ends the discussion as to whether change in corporate governance has any impact on financial market growth of a country. The papers uses Bayesian econometric model. The paper thus signals the end of LLSV led question as to whether law can affect finance.

Bank Governance

2016 ◽  
Author(s):  
John Armour
Keyword(s):  
Adverse Effect ◽  
Corporate Governance ◽  
Financial Crisis ◽  
Executive Compensation ◽  
Agency Costs ◽  
Shareholder Primacy ◽  
Management Agency ◽  
Bank Managers ◽  
Governance Practices ◽  
Governance Tools

According to a common narrative, the failure of banks in the financial crisis reflected poor corporate governance practices, as well as inadequate prudential regulatory safeguards. Yet it turns out that the “best” governance practices according to ordinary standards were the ones that did worst during the financial crisis. In the period leading up to the financial crisis, it was believed that regulation would cause banks to internalize the costs of their activities, meaning that what maximized bank shareholders’ returns would also be in the interests of society. Consequently, large banks used the same governance tools as non-financial companies to minimize shareholder-management agency costs, namely independent boards, shareholder rights, the shareholder primacy norm, the threat of takeovers, and equity-based executive compensation. Unfortunately, such tools had the adverse effect of encouraging bank managers to take excessive risks. Consequently, a significant rethink about the way in which banks are governed is required.

scholarly journals Impact of Product Mix and Corporate Governance Practices on Earnings Volatility-Evidence from Banking Sector of Pakistan

2016 ◽  
Vol 3 (2) ◽  
pp. 1
Author(s):  
Natasha Yaqub ◽  
Huma Ayub
Keyword(s):  
Corporate Governance ◽  
Banking Sector ◽  
Contributing Factors ◽  
Board Size ◽  
Product Mix ◽  
Earnings Volatility ◽  
Governance Practices ◽  
Revenue Volatility ◽  
The Relationship

The study examines the relationship between product mix and corporate governance on earnings volatility with the help of degree of total leverage (DTL) model. The present study attempts to fill the gap by investigating the relationship between product mix and corporate governance on earnings volatility for developing financial market during the period of 2005-2015. Earnings volatility is analysed by two proxies’ .i.e. revenue volatility and degree of total leverage. This study has used mainly two types of product mix that consists of lending and fee-based activities while board size, board independence and CEO power is used to measure corporate governance. The results of the study signify the adverse impact of fee-based activities on earnings volatility in the banking sector of Pakistan. Corporate governance confirms the board size and power of CEO in the board as contributing factors to control earnings volatility. The findings are useful to the bankers and regulators to comprehend the role of diversification and corporate governance in creating value and reducing risk for the stakeholders.

scholarly journals Does Growing Economy And Better Governance Impede Banking Efficiency? A DEA Analysis

2015 ◽  
Vol 31 (6) ◽  
pp. 2213
Author(s):  
Ramiz Ur Rehman ◽  
Junrui Zhang ◽  
Rizwan Ali ◽  
Abdul Qadeer
Keyword(s):  
Corporate Governance ◽  
Interest Rates ◽  
Banking Sector ◽  
Negative Impact ◽  
Positive Impact ◽  
Foreign Banks ◽  
Significant Difference ◽  
Governance Practices ◽  
Growing Economy ◽  
The Impact

The paper estimates the efficiencies of Pakistani banking sector from 1998-2009. The analysis is further extended and regressed estimated banking efficiencies by using Data Envelopment Analysis (DEA), with macro-economic indicators and corporate governance variables of the banking sector. The purpose of this analysis is to determine the impact of overall economic conditions of a country and corporate governance practices on banking efficiencies. The results suggest that the corporate governance practices, like, board size, board independence have positive impact on overall banking sector efficiencies of Pakistan. Also, the GPD growth and interest rates have positive and negative impact on banking efficiencies respectively. The study has not found any significant difference in banking efficiencies of state-owned, private and foreign banks of Pakistan. 

scholarly journals PENGARUH PENERAPAN GOOD CORPORATE GOVERNANCE TERHADAP PROFITABILITAS PADA PERUSAHAAN PERBANKAN YANG TERDAFTAR DI BEI PERIODE 2009-2013

2014 ◽  
Vol 3 (1) ◽  
pp. 77
Author(s):  
Riana Christel Tumewu ◽  
Stanly Alexander
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Banking Sector ◽  
Stock Exchange ◽  
Return On Equity ◽  
Purposive Sampling ◽  
Good Corporate Governance ◽  
Governance Practices ◽  
Independent Variable ◽  
Simple Regression

ABSTRAK Sejak krisis ekonomi tahun 1997 pelaksanaan tata kelola perusahaan yang baik, atau lebih dikenal dengan Good Corporate Governance (GCG) menjadi isu yang mengemuka di Indonesia. Akibat buruknya tata kelola perusahaan di Indonesia pada masa itu, menyebabkan perekonomian jatuh. Sehingga setiap orang setuju untuk mengcover kesulitan indonesia dimulai dengan tata kelola perusahaan. Objek dari penelitian ini yaitu dampak dari penerapan good corporate governance terhadap ROE. Tujuan dari penelitian ini adalah untuk mengetahui tentang pengaruh penerapn good corporate governance pada kinerja keuangan perusahaan. Sampel dalam penelitian ini adalah perusahaan sektor perbankan yang terdaftar di BEI (Bursa Efek Indonesia) dalam periode 2009-2013. Jumlah sampel yang digunakan sebanyak 16 perusahaan yang diambil melalui purposive sampling. Metode analisis dari penelitian ini menggunakan regresi berganda dan regresi sederhana program SPSS 20. Kata Kunci: Good Corporate Governance, Profitabilitas  ABSTRACT Since the economic crisis 1997 the implementation of good corporate governance being an issue in indonesia. The bad thing of governance’s company in those days causing indonesian economy being slump. So, every one agree to recovered from adversity, indonesia have to start with governance good corporate. The main objective of this research was to determine the effect of implementation of good corporate governance (GCG) to return on equity. The purpose of this research is to know about the influence of empirical evidence of Good Corporate Governance practices to the company's financial performance. The independent variable in this research is the implementation of GCG and the dependent variable is the financial performance using a ratio of profitability. The sample in this study were banking sector companies listed in Indonesian Stock Exchange (IDX) in the periode 2009-2013. The number of sample used were 16 companies listed were taken by purposive sampling. The method of analysis of this research used simple regression with SPSS 20 Program. Keyword: Good Corporate Governance, Profitability

Corporate Governance

2018 ◽  
Author(s):  
Jackie Krafft ◽  
Jacques-Laurent Ravix
Keyword(s):  
Corporate Governance ◽  
High Risk ◽  
Empirical Evidence ◽  
Negative Relationship ◽  
Positive Relationships ◽  
Shareholder Primacy ◽  
Innovative Performance ◽  
Governance Practices ◽  
The Impact

Little attention has been devoted to the impact of corporate governance practices on firms’ innovative performance. This chapter reviews the literature to show that there is theoretical ambiguity. There is the argument that corporate governance and new forms of finance realign managers’ interests, with greater efficiency for all types of investments. However, some argue that innovative R&D has distinctive characteristics, like high risk and long-term horizon, that may modify the efficiency effect. The issue has generated many studies where the long tradition of positive relationships between governance and efficiency is now contrasted by some recent empirical evidence suggesting a negative relationship. The chapter argues that shareholder primacy or owner activism in corporate governance and new forms of finance represent a potential mismatch with innovation.

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