Financial Crises and Failed Corporate Governance

Financial Crises and Failed Corporate Governance

William Handorf

Contact

George Washington University

Financial Crises and Failed Corporate Governance

Article Fingerprint

ReserarchID

C: FINANCE1ZPK0

Financial Crises and Failed Corporate Governance Banner

AI TAKEAWAY

Connecting with the Eternal Ground

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.

References

47 Cites in Article

Reference Format

Amy Edmondson (2011). University of Bahrain creates business analytics program.
Balasingham Balachandran,Barry Williams (2018). Effective Governance, Financial Markets, Financial Institutions & Crises.
Spencer Stuart (2017). Dickson, Spencer Stuart, (28 Nov. 1873–17 Jan. 1951).
Michael Rubach (2016). Institutional Shareholder Activism.
Guhan Subramanian (2015). The Review of Corporate Finance Studies Volume 4 • Number 1 • March 2015 - Front Cover.
(2018). Unknown Title.
B Fischoff (1975). Hindsight is not equal to foresight: The effect of outcome knowledge on judgment under uncertainty..
J Rizzi (2018). Relaxing Regulations Could Make Next Crisis Worse.
Rachael Ensign,Lillian Rizzo (2018). Looser Lending Worries Regulators.
Patricia Mccoy,A (2018). Prepared Statement of Patricia A. McCoy Before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, Hearing on 'Consumer Protections in Financial Services,' March 3, 2009.
Ryan Dezember,Peter Rudegeair (2018). Introduction: The Quest for an Investors’ Democracy.
Christopher Whittall (2017). Buyers Snap Up Riskier Leveraged Debt.
(1914). United States-Canada fisheries. Hearings before the Committee on foreign affairs, House of representatives, Sixty-third Congress, second session, on H.R. 13005.
George Santayana (1905). The Life of Reason: Reason in Common Sense.
Jeffrey Hummel,Rogers (2015). The History of U.S. Recessions and Banking Crises.
Milton Friedman,Anna Swartz (1963). A Monetary History of the United States: 1867-1960.
Ben Bernanke (1983). Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression.
John Boyd,Mark Gertler (1994). The Role of Large Banks in the Recent U.S. Banking Crisis.
Charles Calomiris (2010). Banking crises yesterday and today.
Richard Parsons (2012). Banks Should Reject More Board Candidates.
Charles Kindleberger (1978). Manias, Panics and Crashes: A History of Financial Crises.
Douglas Diamond,Philip Dybvig (1983). Bank Runs, Deposit Insurance and Liquidity.
J Knox (1903). A History of Banking in the United States.
Van Horne,James (1965). Interest Rate Risk and the Term Structure of Interest Rates.
Arturo Estrella,Frederic Mishkin (1996). Predicting U.S. Recessions: Financial Variables as Leading Indicators.
Arturo Estrella,Mary Trubin (2006). The Yield Curve as a Leading Indicator: Some Practical Issues.
(2017). Federal Deposit Insurance Corporation (FDIC).
William Handorf (2009). The Panic of 2008: Bank Failure and Commercial Real Estate.
(2010). Federal Deposit Insurance Corporation.
Adrian Cadbury (1992). committee chair, Committee on the Financial Aspects of Corporate Governance in the UK.
Harald Baum (2016). The Rise of the Independent Director: A Historical and Comparative Perspective.
David Erkens,Mingyi Hung,Pedro Matos (2012). Corporate governance in the 2007–2008 financial crisis: Evidence from financial institutions worldwide.
Pablo Alonso,Andres De,Eleuterio Vallelado (2008). Corporate Governance in Banking: The Role of the Board of Directors.
Shams Pathan,Robert Faff (2013). Does board structure in banks really affect their performance?.
Renée Adams,Hamid Mehran (2012). Bank board structure and performance: Evidence for large bank holding companies.
Catarina Fernandes,Jorge Farinha,Francisco Martins,Cesario Mateus (2017). Supervisory boards, financial crisis and bank performance: do board characteristics matter?.
Gennaro Bernile,Vineet Bhagwat,Scott Yonker (2018). Board Diversity, Firm Risk, and Corporate Policies.
William Handorf (2018). Value Creation, Risk Management and US Bank Holding Company Governance.
M Goktan,Robert Kieschnick,Rabih Moussawi (2018). Corporate Governance and Firm Survival.
Jeremy Kress (2017). Board to Death: How Busy Directors Could Cause the Next Financial Crisis.
David Ladipo,Stilpon Nestor (2009). Bank Boards and the Financial Crisis.
Amos Tversky,Daniel Kahneman (1973). Availability: A heuristic for judging frequency and probability.
(2018). Failed Board, Failed Bank: First in a Series on Governance.
John Byrd,Elizabeth Cooperman,Glenn Wolfe (2010). Director tenure and the compensation of bank CEOs.
Renoe Doorga (2014). Independent Directors on Bank Boards: What is Their Added Value?.
Mahzarin Banaji,Anthony Greenwald (2016). Mahzarin Banaji on Implicit Bias.
M Essen,P-J Engelen,M Carney (2013). Does 'Good' Corporate Governance, Help in a Crisis? The Impact of Country and Firm-level Governance Mechanisms in the European Financial Crisis.

Download References

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.

Data Availability

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).

More Citation Formats

Select Citation Style:

Download Citation

GJMBR Volume 19 Issue C4

Explore Journals Explore Volume Read This Issue

Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

Keywords

Not Found

Classification

GJMBR-C Classification JEL Code: G01

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

Version of record

v1.2

Issue date

May 31, 2019

Language

Experiance in AR

Explore published articles in an immersive Augmented Reality environment. Our platform converts research papers into interactive 3D books, allowing readers to view and interact with content using AR and VR compatible devices.

View in VR

Read in 3D

Your published article is automatically converted into a realistic 3D book. Flip through pages and read research papers in a more engaging and interactive format.

View in 3D

Article Matrices

Total Views: 2836

Total Downloads: 1459

2026 Trends

Our website is actively being updated, and changes may occur frequently. Please clear your browser cache if needed. For feedback or error reporting, please email [email protected]