Corporate governance and the systemic risk of financial institutions

Jamshed Iqbal, Sascha Strobl and Sami Vähämaa

Journal of Economics and Business, 2015, vol. 82, issue C, 42-61

Abstract: This paper studies the relationship between corporate governance and the systemic risk of financial institutions. Specifically, using a sample of large U.S. financial institutions from 2005 to 2010, we examine whether the strength of corporate governance mechanisms can explain the cross-sectional variation in systemic risk around the recent financial crisis. Our empirical findings indicate that financial institutions with stronger and more shareholder-focused corporate governance structures and boards of directors are associated with higher levels of systemic risk. Thus, our results suggest that good corporate governance may encourage rather than constrain excessive risk-taking in the financial industry.

Keywords: Corporate governance; Boards; Systemic risk; Bank risk-taking; Financial crisis (search for similar items in EconPapers)
JEL-codes: G01 G20 G21 G30 G32 G34 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:82:y:2015:i:c:p:42-61

DOI: 10.1016/j.jeconbus.2015.06.001

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