Corporate Governance and Its Benefits: Does It Really Matter for Banks?

Abstract

Corporate governance is one of the force that keeps all the pillars of a corporation and in turn, collectively that of the economy, in their places. Now, six years later, there is no doubt that if this elementary force is not made a subject of extensive research and practice, the world as a whole will inevitably succumb to the drastically changing environment of the 21st century, globalized and industrialized world and the threats it poses. We begin this paper by explaining why governance of banks differs from governance of nonfinancial firms and its importance in banking industry. We then look at some areas of governance: corporate governance principles, parties, boards, risk management, and market discipline. We discuss promising solutions and areas where further research is needed.

Keywords: Corporate governance, banks, financial institutions, organizational development and benefits.