CORPORATE GOVERNANCE IN BANKING: A SURVEY OF THE LITERATURE

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Ilduara Busta

DOI:10.22495/cocv7i3c3p4

Abstract

The aim of this paper is to explain the particular characteristics of the corporate governance of banks and its role for good bank performance. In order to do that, it reviews the existing literature on this issue trying to answer three main questions: (i) Why are banks different? Existing research points at diverse features, such as, regulation, supervision, capital structure, risk, fiduciary relationships, ownership, and deposit insurance, that would make banks special and thereby influence their corporate governance. (ii) What is different about bank governance? According to past studies, banks’ boards of directors are larger, more independent, have a superior number of committees and meet more often, but seem to play a weaker disciplinary role. Executive compensation would be higher in banking, but pay-performance sensitivity appears lower. (iii) What works for banks? Larger boards, more concentrated ownership structures and certain levels of managerial shareholdings are the principal factors suggested by the empirical evidence to date that seem to lead banks to higher performance.

Keywords: Corporate Governance, Banks, Performance

How to cite this paper: Busta, I. (2010). The influence of shareholder voting rights on internal control mechanisms: a comparative study of publicly traded firms in Portugal and United Kingdom. Corporate Ownership & Control, 7(3-3), 368-386. http://doi.org/10.22495/cocv7i3c3p4