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Showing results 1 to 10 of approximately 12.
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Journal Article
The Gordon Gekko effect: the role of culture in the financial industry
Culture is a potent force in shaping individual and group behavior, yet it has received scant attention in the context of financial risk management and the 2007-09 financial crisis. This article presents a brief overview of the role of culture as it is seen by psychologists, sociologists, and economists, and then describes a specific framework for analyzing culture in the context of financial practices and institutions. Using this framework, the author addresses three questions: (1) what is culture? (2) does it matter? and (3) can it be changed? He illustrates the utility of this framework by ...
Journal Article
Introduction and appendix to Behavioral Risk Management in the Financial Services Industry: The Role of Culture, Governance, and Financial Reporting
This volume, four years in the making, includes nine research papers that aim to identify and understand the key factors affecting governance and culture in the banking industry. The volume is divided into two complementary parts. Part I introduces the concept of culture and its importance to risk management and financial stability. The articles present a framework for diagnosing and changing culture, describe how corporate culture is shaped, explore the importance of effective risk management, and examine the roles of deferred cash compensation and bank cash holdings in promoting financial ...
Working Paper
Information Disclosures, Default Risk, and Bank Value
This paper investigates the causal effects of voluntary information disclosures on a bank's expected default probability, enterprise risk, and value. I measure disclosure via a self-constructed index for the largest 80 U.S. bank holding companies for the period 1998-2011. I provide evidence that a bank's management responds to a plausibly exogenous deterioration in the supply of public information by increasing its voluntary disclosure, which in turn improves investors' assessment of the bank risk and value. This evidence suggests that disclosure may alleviate informational frictions and lead ...
Speech
Remarks on the Panel “Bank Crisis Framework: Learning from Experience”
Remarks at the Paris Meeting of the Committee on International Monetary Law of the International Law Association (MOCOMILA), Paris, France.
Working Paper
Why does the FDIC sue?
Cases the Federal Deposit Insurance Corporation (FDIC) pursues against the directors and officers of failed commercial banks for (gross) negligence are important for the corporate governance of U.S. commercial banks. These cases shape the kernel of bank corporate governance, as they guide expectations of bankers and regulators in defining the limits of acceptable behavior under financial distress. We examine the differences in behavior of all 408 U.S. commercial banks that were taken into receivership between 2007?2012. Sued banks had different balance sheet dynamics in the three years prior ...
Journal Article
The role of financial reporting and transparency in corporate governance
The authors review recent literature on the role of corporate financial reporting and transparency in reducing governance-related agency conflicts between managers, directors, shareholders, and other stakeholders?most notably financial regulators?and suggest some avenues for future research. Key themes include the endogenous nature of governance mechanisms with respect to information asymmetry between contracting parties, the heterogeneous nature of the informational demands of contracting parties, and the corresponding heterogeneity of the associated governance mechanisms. The authors also ...
Working Paper
A Critical Review of the Common Ownership Literature
The rapid growth in index funds and significant consolidation in the asset-management industry over the past few decades has led to higher levels of common ownership and increased attention on the topic by academic researchers. A consensus has yet to emerge from the literature regarding the consequences of increased common ownership on firm behavior and market outcomes. Given the potential implications for firms and investors alike, it is perhaps not surprising that policymakers, legal scholars, finance and accounting academics, and practitioners have all taken a keen interest in the subject. ...
Working Paper
Corporate Governance and Risk Management at Unprotected Banks: National Banks in the 1890s
Managers' incentives may conflict with those of shareholders or creditors, particularly at leveraged, opaque banks. Bankers may abuse their control rights to give themselves excessive salaries, favored access to credit, or to take excessive risks that benefit themselves at the expense of depositors. Banks must design contracting and governance structures that sufficiently resolve agency problems so that they can attract funding from outside shareholders and depositors. We examine banks from the 1890s, a period when there were no distortions from deposit insurance or government interventions ...
Report
Bank Complexity, Governance, and Risk
Bank holding companies (BHCs) can be complex organizations, conducting multiple lines of business through many distinct legal entities and across a range of geographies. While such complexity raises the costs of bank resolution when organizations fail, the effect of complexity on BHCs’ broader risk profiles is less well understood. Business, organizational, and geographic complexity can engender explicit trade-offs between the agency problems that increase risk and the diversification, liquidity management, and synergy improvements that reduce risk. The outcomes of such trade-offs may ...
Journal Article
Bank corporate governance: a proposal for the post-crisis world
The corporate governance problems of banks are qualitatively and quantitatively different from those of other firms. The authors argue that a key factor contributing to this difference is the growing opacity and complexity of bank activities, a trend that has increased the difficulty of managing risk in financial firms. They also cite the governance challenges posed by the holding company organization of banks, in which two boards of directors?the bank?s own board and the board of the holding company that owns the bank?monitor the bank. This paradigm results in significant confusion about the ...