Munich Personal RePEc Archive

The effect of corporate governance on the performance of US investment banks.

mamatzakis, em (2014): The effect of corporate governance on the performance of US investment banks.

[img]
Preview
PDF
MPRA_paper_60198.pdf

Download (3MB) | Preview

Abstract

This paper focuses on the impact of the corporate governance, using a plethora of measures, on the performance of US investment banks over the 2000-2012 period. This time period offers a unique set of information, related to the credit crunch, that we model using a dynamic threshold analysis to reveal new insights into the relationship between corporate governance and bank performance. Results show that the board size asserts a negative effect on performance consistent with the ‘agency cost hypothesis’, particularly for banks with board size higher than ten members. Threshold analysis reveals that in the post-crisis period most of investment banks opt for boards with less than ten members, aiming to decrease agency conflicts that large boards suffer from. We also find a negative association between operational complexity and performance. Moreover, CEO power asserts a positive effect on performance consistent with the ‘stewardship hypothesis’. In addition, an increase in the bank ownership held by the board has a negative impact on performance for banks below a certain threshold. On the other hand, for banks with board ownership above the threshold value this effect turns positive, indicating an alignment between shareholders’ and managers’ incentives.

Logo of the University Library LMU Munich
MPRA is a RePEc service hosted by
the University Library LMU Munich in Germany.