Financial Crises and Failed Corporate Governance

Financial Crises and Failed Corporate Governance

William Handorf

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George Washington University

Financial Crises and Failed Corporate Governance

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Abstract

The banking sector is special given the importance of credit to support economic growth, and enormous public costs periodically sustained to bailout extensive institutional failures. US banks fail in waves approximately every generation and are unable to cope with severe economic downturns and incur excessive risk in a predictable and preventable manner. Is good corporate governance focusing on efforts to refresh boards by age or term limits the cause of episodic failure? As institutions refresh boards, banks lose directors with experience related to prior periods of crisis. Consistent with the availability heuristic, recall and memory are important to judgment. If relatively few directors have personal experience of a prior financial disaster, they are unable to recommend more conservative strategies. While some deservedly will believe the proposal a reversal in good governance, banks should consider suspending term and/or mandatory age limits for a few directors. Each board will need to overcome common “blind spots” that young equals good. Ageism is well-known and documented.

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

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Not applicable for this article.

How to Cite This Article

William Handorf. 2019. \u201cFinancial Crises and Failed Corporate Governance\u201d. Global Journal of Management and Business Research - C: Finance GJMBR-C Volume 19 (GJMBR Volume 19 Issue C4).

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GJMBR Volume 19 Issue C4

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Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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GJMBR-C Classification JEL Code: G01

Submission ReceivedDecember 14, 2018
Peer Review Double Blind
Handling Editor
Accepted January 3, 2019
Published January 15, 2019

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v1.2

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May 31, 2019

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