Suchergebnisse

"As Germany enters the 21st century, the traditional system of corporate governance, often referred to as 'Deutschland AG', has come under intense pressure to change. This report seeks to analyze the recent dynamics of the system to assess the extent to which they have already led to an erosion of the traditional characteristics. Many of the distinct features of the German system have shown strong resilience despite the pressure for change, while other features seem to have unraveled quickly. The areas in which these changes appeared to have emerged most profoundly and quickly are in the role of banks and in the role of financial markets. Germany is often cited as a classical case of 'non-shareholder value orientation', whose production-oriented, long-term, risk adverse and consensus-driven values have often been contrasted with the 'Anglo-Saxon' approach. The forces currently driving the German political economy towards a shareholder-value orientation can be summarized as follows: State measures to deregulate financial markets; pressure of managers of investments funds and pension funds, in particular from the USA; responses to product-market changes and the internationalization of production. These factors have had an input on all three pillars of the traditional German system: 1. The dominant role of the banks in a complex system of cross-shareholding and in company financing, 2. the system of industrial co-determination, 3. the production-centered, company-centered management system. But the developments are still recent and ambiguous. The question is whether these forces will initiate major and permanent change in the operating principles of the German system or whether they will be superseded by the system's traditional logic. Our report explores these issues in a preliminary way at a point of time when it is not possible to provide a definite answer to what these changes portend." (author's abstract)

AbstractManuscript TypeReviewResearch Question/IssueWe survey the literature on corporate governance in banks in the US and international settings. We discuss how the specialness of banks, deposit insurance, high bank leverage, and bank regulation interact with bank governance. We evaluate bank governance from three perspectives: (1) maximizing bank equity value, (2) maximizing total enterprise value, and (3) maximizing social objectives. Our survey includes evidence on how bank governance differs from that of manufacturing firms. We also survey studies on managerial incentives in banks and their implications for bank performance and risk taking before and during the 2007–2008 financial crisis.Research Findings/InsightsThe high leverage (usually above 90 percent) of banking institutions gives rise to a trade‐off between strengthening equity governance and maximizing enterprise value. Aligning managers very closely with shareholders can give rise to strong incentives for risk shifting to the detriment of firm value. The bank risk choices might also go against the societal objectives of a stable financial system.Theoretical/Academic ImplicationsWe provide a framework for the optimal design of bank governance and bank regulation, considering the objectives of both depositors and society‐at‐large in addition to those of bank shareholders. This framework could be especially important in determining risk choices by banks and the effects of such on the stability of the financial system.Practitioner/Policy ImplicationsOur analysis of the literature surveyed has policy implications for bank regulation, top‐management compensation in banks, and directives for design of governance in banks. We discuss implications for direct regulation of banks and regulation of bank governance. The findings surveyed provide guidance for board independence, board size, board composition, and incentive features in top‐management compensation.