Can bank boards prevent misconduct?

Duc Duy Nguyen; Jens  Hagendorff; Arman Eshraghi

doi:10.1093/rof/rfv011

Can bank boards prevent misconduct?

Duc Duy Nguyen, Jens Hagendorff, Arman Eshraghi

Centre for Responsible Banking and Finance

Research output: Contribution to journal › Article › peer-review

54 Citations (Scopus)

9 Downloads (Pure)

Abstract

We study regulatory enforcement actions issued against US banks to show that both board monitoring and advising are effective in preventing misconduct by banks. While better monitoring by boards prevents all categories of misconduct, better advising prevents misconduct of a technical nature. Board monitoring increases the likelihood that misconduct is detected, increases the penalties imposed on the CEO, and alleviates shareholder wealth losses following the detection of misconduct by regulators. Our article offers novel insights on how to structure bank boards to prevent bank misconduct.

Original language	English
Pages (from-to)	1-36
Number of pages	36
Journal	Review of Finance
Volume	20
Issue number	1
Early online date	11 Apr 2015
DOIs	https://doi.org/10.1093/rof/rfv011
Publication status	Published - Mar 2016

Keywords

Banks
Enforcement actions
Board monitoring
Board advising

Access to Document

10.1093/rof/rfv011

enforcement_actions_main_paper_AM
© The Authors 2015. Published by Oxford University Press on behalf of the European Finance Association. All rights reserved. This work is made available online in accordance with the publisher’s policies. This is the author created, accepted version manuscript following peer review and may differ slightly from the final published version. The final published version of this work is available at doi: 10.1093/rof/rfv011
Accepted author manuscript, 957 KB

Cite this

@article{62bb6ca2b85d4e7a9fd664181f6892a8,

title = "Can bank boards prevent misconduct?",

abstract = "We study regulatory enforcement actions issued against US banks to show that both board monitoring and advising are effective in preventing misconduct by banks. While better monitoring by boards prevents all categories of misconduct, better advising prevents misconduct of a technical nature. Board monitoring increases the likelihood that misconduct is detected, increases the penalties imposed on the CEO, and alleviates shareholder wealth losses following the detection of misconduct by regulators. Our article offers novel insights on how to structure bank boards to prevent bank misconduct. ",

keywords = "Banks, Enforcement actions, Board monitoring, Board advising",

author = "Nguyen, {Duc Duy} and Jens Hagendorff and Arman Eshraghi",

year = "2016",

month = mar,

doi = "10.1093/rof/rfv011",

language = "English",

volume = "20",

pages = "1--36",

journal = "Review of Finance",

issn = "1572-3097",