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Corporate Governance in Emerging MarketsStrong Boards, Risk Committee and Bank Performance: Evidence from India and China

Corporate Governance in Emerging Markets: Strong Boards, Risk Committee and Bank Performance:... [The recent financial crisis has raised several questions with respect to the corporate governance of financial institutions. This paper investigates whether boards of directors and risk management-related corporate governance mechanisms are associated with a better bank performance during the financial crisis of 2007/2008 for a sample of Chinese and Indian listed banks. We measure market bank performance by Tobin’ Q and price-earnings ratio. In line with the previous literature on US banks, we find the general irrelevance of the standard board’s variables when specific variables related to the risk committee are included in the analysis. We find that the market valuation and the expected market growth (Tobin’ Q and P/E) are larger for banks with smaller risk committee. In particular, we find that the market valuation is negatively associated with the size of the risk committee and positively associated with the number of the risk committee’ meetings. This seems to suggest that the market discounts as favorable the information related to “strong” risk governance.] http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png

Corporate Governance in Emerging MarketsStrong Boards, Risk Committee and Bank Performance: Evidence from India and China

Part of the CSR, Sustainability, Ethics & Governance Book Series
Editors: Boubaker, Sabri; Nguyen, Duc Khuong
Battaglia, Francesca; Gallo, Angela; Graziano, Anna Elvira
Corporate Governance in Emerging Markets — Feb 6, 2014
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References (45)

Publisher
Springer Berlin Heidelberg
Copyright
© Springer-Verlag Berlin Heidelberg 2014
ISBN
978-3-642-44954-3
Pages
79–105
DOI
10.1007/978-3-642-44955-0_4
Publisher site
See Chapter on Publisher Site

Abstract

[The recent financial crisis has raised several questions with respect to the corporate governance of financial institutions. This paper investigates whether boards of directors and risk management-related corporate governance mechanisms are associated with a better bank performance during the financial crisis of 2007/2008 for a sample of Chinese and Indian listed banks. We measure market bank performance by Tobin’ Q and price-earnings ratio. In line with the previous literature on US banks, we find the general irrelevance of the standard board’s variables when specific variables related to the risk committee are included in the analysis. We find that the market valuation and the expected market growth (Tobin’ Q and P/E) are larger for banks with smaller risk committee. In particular, we find that the market valuation is negatively associated with the size of the risk committee and positively associated with the number of the risk committee’ meetings. This seems to suggest that the market discounts as favorable the information related to “strong” risk governance.]

Published: Feb 6, 2014

Keywords: Corporate Governance; Audit Committee; Board Size; Bank Performance; Risk Governance

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