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留学生金融学硕士论文:Corporate governance and rec

Journal of Corporate Finance 6 2000. 141–164
www.elsevier.comrlocatereconbase
Corporate governance and recent consolidationin the banking industry
Yaron Brook a,), Robert J. Hendershott a, Darrell Lee ba Santa Clara UniÍersity, 500 El Camino Real, Santa Clara, CA 95053, USA
b Kennesaw State UniÍersity, Kennesaw, GA, USA
Abstract
Using the universe of publicly traded banks at year-end 1993, we find that target banks’outside directors, but not inside directors, tend to own more stock than their counterparts inother banks. Having an 留学生论文网outside blockholder is also associated with banks becoming targets.In contrast to existing research on industrial firms, board structure does not help determinewhich sample banks sell. Neither the fraction of outsiders on a bank’s board nor having anoutside-dominated board differentiate the target banks in our sample. Instead, outsidedirectorsrshareholders and blockholders appear to be primarily responsible for encouragingbank managers to accept an attractive merger offer q2000 Elsevier Science B.V. All rightsreserved.
JEL classification: G21; G34
Keywords: Takeovers; Corporate governance
Financial economists have long recognized that the widespread separation ofownership and control in large US corporations creates the potential for costlyagency conflicts. Dispersed shareholders’ limited incentive to monitor the behaviorand performance of the agents hired to run their firm can give managerssubstantial freedom to pursue their own interests at the expense of shareholderwealth. Absent mechanisms to control managerial behavior, usually called ‘‘corpo-) Corresponding author.0929-1199r00r$ - see front matter q 2000 Elsevier Science B.V. All rights reserved.
PII: S0929- 119900.00011-0
142 Y. Brook et al.rJournal of Corporate Finance 6 (2000) 141–164rate governance structures,’’ wealth maximization will not exclusively motivatecorporate decision-making.
A company’s board of directors is one of the mechanisms within the firm tomonitor and control managerial behavior.1 The board hires, fires, and compensatesa firm’s top management. However, board members are subject to their ownagency problems. A firm’s chief executive officer CEO. is generally a memberof, and is often the chairman of, the board of directors. CEOs typically also play amajor role in selecting new nominees for the board Lorsch and MacIver, 1989.. Ifboard members are strongly influenced by or beholden to the firm’s top officers, itis unclear whether the board can successfully align shareholder and managerinterests.
The banking industry’s ongoing consolidation offers an excellent experimentalsetting for examining board effectiveness. During the last decade, technologicaladvances in communication and information technologies have reduced the costsof having a geographically dispersed banking organization. Simultaneously, lawsand regulations that had previously fragmented the banking industry have beenrelaxed or, in some cases, eliminated.2 The joint effect has been a dramatic surgein merger activity that has sharply reduced the number of US banks Holland et



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