scholarly journals Testing out the disciplinary role of debt in Croatian banks

2017 ◽  
Vol 3 (1) ◽  
pp. 45-62
Author(s):  
Mario Bambulović ◽  
Ivan Huljak ◽  
Antonija Kožul
Keyword(s):  
Corporate Governance ◽  
Credit Risk ◽  
Agency Theory ◽  
Agency Costs ◽  
Bank Capital ◽  
Efficiency Measure ◽  
Bank Managers ◽  
Bank Governance

AbstractAccording to the agency theory, debt brings discipline to management and therefore, one way of reducing agency costs is by increasing the level of indebtedness. Even though there are a number of specificities of banks as corporations, this agency theory postulate should still be valid. This research is motivated by the need to understand microeconomics of banking better, which could be especially rewarding in CEE countries where the issues of credit risk, bank capital and corporate governance are specific. Accordingly, by testing the disciplinary role of debt in Croatian banks, we contribute to the still scarce literature on bank governance in Croatia. We operationalise the research by first generating an efficiency measure, which we believe adequately represents management efforts and ability to maximize the value of owners’ investment. In the next step, we explore the relation between banks' efficiency and leverage. Our results do not indicate that debt generally creates a discipline mechanism for bank managers in Croatia.

Corporate events’ performance and corporate governance: the Brazilian evidence

2018 ◽  
Vol 18 (1) ◽  
pp. 14-34 ◽  
Author(s):  
Bruno Funchal ◽  
Jedson Pereira Pinto
Keyword(s):  
Corporate Governance ◽  
Stock Market ◽  
Agency Theory ◽  
Agency Costs ◽  
Design Methodology ◽  
Content Type ◽  
Similar Performance ◽  
And Control ◽  
Rule Out

Purpose The purpose of this paper is to investigate the relation between corporate governance and corporate events’ performance. Firms that engage in corporate events seem to perform at least as bad as similar firms that did not. Based on agency theory, the authors hypothesize that lower corporate performance is associated to differences in governance levels. Design/methodology/approach Bessembinder and Zhang’s (2013) approach to evaluate the performance of corporate events has been expanded by considering unique corporate governance features from Brazilian stock market. Findings The results suggest that after controlling for governance levels, event rms and control rms have similar performance. A number of analyses were performed to rule out alternative explanations. Originality/value The results call attention for the role of agency costs in evaluating corporate events’ performance.

scholarly journals Stewardship theory: is board accountability necessary?

2017 ◽  
Vol 59 (6) ◽  
pp. 1292-1314 ◽  
Author(s):  
Andrew Keay
Keyword(s):  
Corporate Governance ◽  
Agency Theory ◽  
Design Methodology ◽  
Agency Problems ◽  
Stewardship Theory ◽  
Content Type ◽  
General Terms ◽  
Practical Implications

Purpose The purpose of the paper is to demonstrate that notwithstanding the fact that stewardship theory embraces things like trust of directors, their professionalism, loyalty and willingness to be concerned for the interests of others, as well as rejecting the foundations of classic agency problems that are asserted by agency theory, board accountability is as relevant to stewardship theory as it is to agency theory. Design/methodology/approach The paper applies the theory underlying board accountability in corporate governance, which is so often applied both in the corporate governance literature and in practice with agency theory in mind, to stewardship theory. Findings While the idea of accountability of boards is generally associated with an explanation and conceptualisation of the role and behaviour of directors as agents within classic agency theory, the paper demonstrates that board accountability is a necessary part of board life even if the role of directors is explained and conceptualised in terms of stewardship theory. Practical implications The paper suggests some accountability mechanisms that might be employed in a stewardship approach. Originality/value While many authors have talked in general terms about board accountability and its importance, this is the first paper that has engaged in a substantial study that links board accountability directly with stewardship theory, and to establish that accountability is necessary.

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.

Debt and Corporate Governance

2015 ◽  
Author(s):  
Charles K. Whitehead
Keyword(s):  
Corporate Governance ◽  
Credit Risk ◽  
Credit Market ◽  
Lending Relationships ◽  
Private Credit ◽  
Traditional Function ◽  
Over Time

This chapter focuses on the evolving role of debt as a tool of corporate governance, or debt governance, within the context of developments in the private credit market. It first discusses debt’s traditional function, with particular emphasis on illiquid loans and the lenders’ reliance on monitoring and covenants in order to manage a borrower’s credit risk. It then considers how loans and lending relationships have evolved over time in light of the increased liquidity of traditionally private instruments. One outcome for debt governance may be a shift from the traditional dependence on covenants and monitoring to a greater reliance on the disciplining effect of liquid credit instruments.

scholarly journals Corporate Governance in Banks and its Impact on Credit and Liquidity Risks: Case of Tunisian Banks

2019 ◽  
Vol 11 (2) ◽  
pp. 148
Author(s):  
Nesrine DJEBALI ◽  
Khemais ZAGHDOUDI
Keyword(s):  
Credit Risk ◽  
Panel Data Analysis ◽  
Liquidity Risk ◽  
Governance Mechanisms ◽  
Random Effects Models ◽  
Bank Managers ◽  
Fixed And Random Effects ◽  
Bank Governance ◽  
Econometric Approach ◽  
The Relationship

Given the crucial role played by banks in a developing country like Tunisia, it is important to maintain their stability. The purpose of this article is twofold. First, it studies the effect of banking governance on credit risk. Second, it tests the relationship between bank governance mechanisms and liquidity risk. In this article, we have combined literature regarding two areas of governance, first, ownership structure and board characteristics, and second, their impact on banking risks. To achieve this goal, we used a sample of 10 Tunisian banks observed during the period 1998-2015. The econometric approach used in this study is based on both the fixed and random effects models of panel data analysis. Our results show that credit risk and liquidity risk are directly related to bank governance mechanisms. These findings enable bank managers to better understand the factors influencing bank risk and serve as a basis for regulations to strengthen bank governance.

scholarly journals Secrecy, collusion and coalition building in corporate governance

2007 ◽  
Vol 4 (3) ◽  
pp. 10-24 ◽  
Author(s):  
Lee Mick Swartz
Keyword(s):  
Corporate Governance ◽  
Agency Theory ◽  
Negative Impact ◽  
Agency Cost ◽  
Coalition Building ◽  
Role Of Information

This paper studies secrecy in voting and the role of information on coalition building in corporate governance. It finds evidence that supports the coalition building hypothesis and, in part, rejects the agency cost hypothesis. The conditions for insiders and large outsiders to form coalitions are examined. The results are consistent with insiders and large outsiders cooperating and voting as a block to maintain power, this imposes costs on other shareholders. Consistent with the agency theory and the coalition building theory, management initiated amendments have a more negative impact than shareholder initiated amendments. The Vote Your Conscience theory is rejected.

Sign in / Sign up

Export Citation Format

Share Document