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  Corporate Governance and Risk Taking
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 Ophav:
Ridder Johansen, Louise1, Forfatter
Rohde, Carsten 2, Vejleder
Tilknytninger:
1Det Samfundsvidenskabelige Fakultet, Københavns Universitet, København, Danmark, diskurs:7001              
2Økonomisk Institut, Det Samfundsvidenskabelige Fakultet, Københavns Universitet, København, Danmark, diskurs:7014              
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Indhold

Ukontrollerede emneord: Corporate Governance, Risk Taking, Financial Crisis, Behavioural Economics, Time-inconsistent Preferences
 Abstract: In the wake of the great financial crisis, corporate governance has once again been catapulted onto centre stage. The examples of corporate collapses resulting from weak governance systems are numerous and have highlighted the need for improving and reforming corporate governance at an international level. Corporate governance is important for corporate success, and thus the economic society as a whole.
Especially there has been a lot of criticism directed at the boards of monetary financial institutions, and in the literature weaknesses in corporate governance of banks are being acknowledged as one of the main reasons for the current financial crisis.
This thesis is motivated by the above criticism and seeks to investigate why some banks performed worse than others during and after the financial crisis. In the academic literature there is a general consensus that the differences in performance can be attributed to excessive risk taking and failed risk management.
I use the development in return on equity (ROE) as an indicator of bank performance. I investigate what caused the differences in performance of Danish banks during the recent financial crisis by making a decomposition analysis of ROE. The decomposition of ROE shows that banks, that experienced soared growth in ROE prior to the crisis also were the ones performing worst during the crisis and afterwards. Furthermore, I find that a growth in ROE, that is primarily driven by increased economic leverage, irrespectively of whether regulatory leverage has remained unchanged, should be a cause of angst, rather than celebration.
Corporate governance presents certain challenges as a chosen research area. The combination between soft law and hard law makes it difficult to analyse in a traditional economic model. However, most existing literature in the field of corporate governance analyses the governance failures in a theoretical framework proposed by agency theory. The width and depth of the research area requires a theoretical framework that is able to incorporate various kinds of incentive mechanisms.
Therefore, a central part of this thesis also wish to demonstrate the limitations of assuming that corporate governance of banks fit perfectly into the agency theory, and instead propose an alternative conceptual framework more suitable for this analysis.
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Speciale_30.03.12.pdf (Hovedtekst)
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Offentlig
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Copyright dato:
2012-06-14
Copyright information:
De fulde rettigheder til dette materiale tilhører forfatteren.
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Bogmærk denne post: https://diskurs.kb.dk/item/diskurs:31162:1
 Type: Speciale
Alternativ titel: A behavioural and explorative study of bank performance
Alternativ titel: Selskabsledelse og risikotagning
Alternativ titel: Et adfærds- og eksporativt studie af bankers performance
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Detaljer

Sprog: English - eng
 Datoer: 2012-03-30
 Sider: -
 Publiceringsinfo: København : Københavns Universitet
 Indholdsfortegnelse: 1 INTRODUCTION 6
1.1 RESEARCH QUESTION . 8
1.2 METHODOLOGY 8
1.2.1 Research design 8
1.2.2 Data . 9
1.2.3 Theory and literature choice . 9
1.3 STRUCTURE OF THE THESIS . 10
2 DEFINITIONS OF CORPORATE GOVERNANCE 11
2.1 THE DANISH CORPORATE GOVERNANCE SYSTEM 13
2.2 WHY IS CORPORATE GOVERNANCE IMPORTANT? 14
3 CORPORATE GOVERNANCE OF BANKS . 15
3.1 WHAT MAKES BANKS DIFFERENT FROM OTHER CORPORATIONS? 15
3.1.1 Special governance features that characterise banks . 16
3.1.2 The role of the board of directors . 17
3.1.3 Risk management . 17
3.2 BEFORE AND AFTER THE FINANCIAL CRISIS 18
3.2.1 The U.S. mortgage market . 19
3.2.2 The Danish housing prices . 20
4 LITERATURE REVIEW 23
4.1 BOARD COMPOSITION AND CHARACTERISTICS (EFFECT ON PERFORMANCE) . 23
4.2 RISK MANAGEMENT AND THE BOARDS’ ABILITY TO UNDERSTAND COMPLEX DATA 24
4.3 OUTSIDE FACTORS (SHOCKS TO THE ECONOMY, REGULATION AND CREDIT RATING AGENCIES) . 26
4.4 IDENTIFICATION AND DISCUSSION OF THE FINDINGS OF THE LITERATURE . 27
5 A COMPARATIVE CASE STUDY OF PERFORMANCE IN DANISH BANKS . 28
5.1 PERFORMANCE MEASURES FOR FINANCIAL INSTITUTIONS 28
5.1.1 What did ROE tell us about performance during the current financial crisis? . 29
5.1.2 The development in ROE before and during the crisis in selected banks . 29
5.1.3 What drives ROE? 31
5.1.4 A stylized case of a strong performer during the crisis . 33
5.1.5 A stylized case of a weak performer during the crisis . 33
5.1.6 Criticism of ROE: 34
5.2 THE CASE OF AMAGERBANKEN - A WEEK PERFORMER DURING THE CRISIS 34
5.2.1 Amagerbanken . 35
Financial key figures analysis of Amagerbanken . 42
5.2.2 Discussion of the case of Amagerbanken 45
 Note: -
 Type: Speciale
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