Anginer, DenizDemirguc-Kunt, AsliHuizinga, HarryMa, Kebin2014-10-022014-10-022014-09https://hdl.handle.net/10986/20343This paper finds that shareholder-friendly corporate governance is positively associated with bank insolvency risk, as proxied by the Z-score and the Merton's distance to default measure, for an international sample of banks over the 2004-08 period. Banks are special in that "good" corporate governance increases bank insolvency risk relatively more for banks that are large and located in countries with sound public finances, as banks aim to exploit the financial safety net. Good corporate governance is specifically associated with higher asset volatility, more nonperforming loans, and a lower tangible capital ratio. Furthermore, good corporate governance is associated with more bank risk-taking at times of rapid economic expansion. Consistent with increased risk-taking, good corporate governance is associated with a higher valuation of the implicit insurance provided by the financial safety net, especially in the case of large banks. These results underline the importance of the financial safety net and too-big-to-fail policies in encouraging excessive risk-taking by banks.en-USCC BY 3.0 IGOACCOUNTINGADVERSE EFFECTSASSET GROWTHASSET VALUEASSET VALUESASSETS RATIOAUDIT COMMITTEEAUDITINGAUDITORSBALANCE SHEETBANK ACTIVITIESBANK ASSETBANK ASSETSBANK BAILOUTSBANK CAPITALBANK CAPITALIZATIONBANK FAILUREBANK FAILURESBANK HOLDINGBANK HOLDING COMPANIESBANK INSOLVENCYBANK LENDINGBANK LIABILITIESBANK LOANBANK LOANSBANK REGULATIONBANK RISKBANK SIZEBANKING INDUSTRYBANKING SECTORBANKRUPTCYBANKSBOOK VALUEBUDGET BALANCEBUSINESS CYCLECALL OPTIONCAPITAL ADEQUACYCAPITAL ASSETSCAPITAL RATIOCAPITAL RATIOSCAPITAL REQUIREMENTSCAPITALIZATIONCASH FLOWCDSCOLLATERALCOMMERCIAL BANKCOMMERCIAL BANKSCONSUMER PRICE INFLATIONCONTINGENT CLAIMCORPORATE BANKRUPTCYCORPORATE DEBTCORPORATE FINANCECORPORATE GOVERNANCECORPORATE GOVERNANCE REFORMSCORPORATE GOVERNANCE REGIMESCOUNTRY COVERAGECOUNTRY DATACOUNTRY FIXED EFFECTSCREDIBILITYCREDIT EXPANSIONCREDIT RISKCREDITORSCREDITWORTHINESSDEBTDEFAULT PROBABILITIESDEFAULT RISKDEFICITSDEGREE OF RISKDEPENDENTDEPOSITDEPOSIT FUNDINGDEPOSIT INSURANCEDEPOSITSDEREGULATIONDISTRESSED BANKSDIVIDENDDIVIDEND RATEDIVIDENDSDUMMY VARIABLEDUMMY VARIABLESECONOMIC GROWTHEQUITY HOLDEREQUITY PRICESEQUITY RATIOEQUITY RETURNSEQUITY VALUEFACE VALUEFAIR VALUEFEDERAL RESERVEFEDERAL RESERVE BANKFEDERAL RESERVE BANK OF NEW YORKFEE INCOMEFINANCIAL CRISISFINANCIAL INSTABILITYFINANCIAL INSTITUTIONSFINANCIAL INTERMEDIATIONFINANCIAL MARKETFINANCIAL SAFETY NETFINANCIAL SAFETY NETSFINANCIAL SERVICESFINANCIAL STUDIESFINANCIAL SUPPORTFINANCIAL SYSTEMFISCAL BALANCEFIXED ASSETSFOREIGN FIRMSGOVERNANCE INDEXGOVERNANCE INDICESGOVERNANCE PRACTICESGOVERNANCE VARIABLESGOVERNMENT BUDGETGOVERNMENT SECURITIESGROWTH RATEHOLDINGSHOLDINGS OF GOVERNMENT SECURITIESINDIVIDUAL BANKSINFLATIONINFLATION RATEINSOLVENCY RISKINSOLVENTINSTRUMENTINSURANCEINSURANCE PREMIUMINTANGIBLEINTEREST INCOMEINTEREST RATESINTERNATIONAL BANKINTERPOLATIONINVESTINGINVESTOR PROTECTIONLARGE BANKSLIABILITYLIABILITY SIDELOAN LOSSLOAN LOSS PROVISIONINGLOAN PERFORMANCELOAN QUALITYMARKET DATAMARKET DISCIPLINEMARKET EQUITYMARKET VALUEMARKET VALUE OF EQUITYMERGERSMINORITY SHAREHOLDERSMORAL HAZARDMORTGAGEMORTGAGE-BACKED SECURITIESNATIONAL BANKSNATIONAL ECONOMYNON-PERFORMING LOANSNONPERFORMING LOANSNPLOPERATING INCOMEOVERSIGHT OF BANKPERFORMANCE RISKPOLICY IMPLICATIONSPROBABILITY OF BANKRUPTCYPUBLIC COMPANIESPUBLIC DEFICITSPUBLIC FINANCESPUBLIC POLICYPUT OPTIONRAPID ECONOMIC EXPANSIONRATE OF RETURNREAL ESTATEREGULATORSREGULATORY OVERSIGHTREGULATORY RESTRICTIONSREPUTATIONRESTRICTIONS ON BANK ACTIVITIESRETURN ON ASSETSRETURN ON EQUITYRISK CONTROLSRISK MANAGEMENTRISK TAKINGRISK WEIGHTRISK WEIGHTED ASSETSRISK WEIGHTSRISK-FREE RATERISKY ASSETSSECURITIES MARKETSSHARE PRICESHAREHOLDERSHAREHOLDERSSHORT-TERM BORROWINGSTOCK OPTIONSTOCK OPTIONSSTOCK PRICESTOCK RETURNSSUPERVISORY AGENCYSUPERVISORY AUTHORITIESTANGIBLE ASSETSTAXTRADINGTRADING INCOMETRANSACTIONTREASURYTREASURY BILLTREASURY BILL RATEVALUATIONVALUE OF ASSETSVALUE OF DEBTVOLATILITYWORLD DEVELOPMENT INDICATORS10.1596/1813-9450-7017