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Erschienen in:
The Meaning of Corporate Governance and its Role in the Banking Sector Kapitel lesen Erstes Kapitel lesen

2022 | OriginalPaper | Buchkapitel

2. Corporate Governance (CG) Theories and the Banking Sector

verfasst von : Bruno Buchetti, Alessandro Santoni

Erschienen in: Corporate Governance in the Banking Sector

Verlag: Springer International Publishing

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Abstract

This chapter aims to clarify the main CG theories. It begins with the agency theory, investigating how the agency costs change in the banking environment. Then, shareholder’s and stakeholder’s theories are described and compared. Finally, it explains other CG theories, that is, the resource dependency theory (RDT), the resource-based view theory (RBV), the stewardship theory, and the upper echelon theory (UET).

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Vorheriges Kapitel The Meaning of Corporate Governance and its Role in the Banking Sector
Nächstes Kapitel Corporate Governance in the Banking Sector (CGBS): A Literature Review
Fußnoten
1
Fama and Jensen (1983) describe the modern corporation as a nexus of unwritten and written contracts.
 
2
For instance, there is no blockholder, so shareholders only hold a small percentage of shares.
 
3
The net present value (NPV) is a financial metric used to calculate the current total value of all future cash flows (and cash outflows) generated by a project.
 
4
Researchers around the world use the classic agency theory problems when investigating agency costs in banks, that is, shareholders vs. directors (as reported in Table 2.1).
 
5
Here we do not refer to investment banks (IBs), considering that deposits in IBs are less relevant. We instead consider a dispersed ownership structure as it is in the classic agency theory.
 
6
This is a multiple principal problem (i.e., two principals and one agent).
 
7
Usually, directors remain for a few years in the BOD.
 
8
This can be replaced with any decision that increases directors’ wealth and power while not maximizing banks’ value or increasing depositors’ protection.
 
9
The level of deposits protection in the European Union (EU) is 100.000 euro and in the United States is 250.000 dollars (Federal Deposit Insurance Corporation).
 
10
As we will see in the next chapter, independent directors do not always reduce agency costs.
 
11
The idea is that directors do this to increase their remuneration because there is already an alignment between shareholders’ and directors’ objectives (the classic shareholders’ vs. directors’ agency cost has been eliminated), how? For example, directors are paid with classic stock options; there is a less dispersed ownership structure; the incentive for an exit strategy from shareholders is high; and there is an adequate number of independent directors (see Appendix 1 to learn how to reduce this agency cost). As we can observe, in this situation, independent directors helping to align shareholders’ and directors’ objective in terms of maximizing the bank’s value could incentivize risk-taking, not reducing it! This can clarify why in classic research on CGBS topics, independent directors in banks often increase risk-taking instead of reducing it, particularly if they have direct financial expertise and there is a one-tier board (please refer to Chap. 3 for further explanation).
 
12
The social view is not related to political aspects (e.g., socialism); in fact, both theories embrace capitalism as a theoretical framework. Today, stakeholder’s view is mainly reflected in CSR (corporate social responsibility) reports (e.g., the sustainability reports) and ESG (environmental, social, and corporate governance) strategies.
 
13
Previous research has not investigated this point.
 
14
Previous research has not investigated this point.
 
15
A significant number of studies believe that the distinction between the roles of the board is not clear (see Hendry and Kiel (2004) and Stiles and Taylor (2001)).
 
16
TMT is a formulation of directors and top managers within a firm (Finkelstein and Hambrick 1996).
 
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Metadaten
Titel
Corporate Governance (CG) Theories and the Banking Sector
verfasst von
Bruno Buchetti
Alessandro Santoni
Copyright-Jahr
2022
Buch
Corporate Governance in the Banking Sector

Print ISBN: 978-3-030-97574-6

Electronic ISBN: 978-3-030-97575-3

Copyright-Jahr: 2022

DOI
https://doi.org/10.1007/978-3-030-97575-3_2