Corporate Governance Of Commercial Banks

In the standard corporate governance theory, commercial banks are primarily viewed as a force monitoring firms. However, the premise for banks to play a positive role in corporate governance of firms is that the banks themselves are subject to effective corporate governance mechanism. The lessons from the East Asian financial crisis prompt people to reflect on the issues of corporate governance of both the non-financial firms as well as the banks. Thus, the corporate governance of banks has begun to attract attention of the researchers.This thesis uses standard theories of corporate governance to highlight the special problems facing corporate governance of financial intermediaries and combines this theoretical perspective with international observations to make policy recommendations. As non-financial corporations, commercial banks face standard corporate governanceproblems. However, as financial intermediaries, banks have some special attibutes different from the standard corporation, which intensify standard corporate governance problems. Moreover, pervasive government involvement raises new impediments to effective corporate control. The severe opaqueness makes it more difficult for equity and debt holders to exert corporate governance of banks and it can weaken competitive forces in the product market and the market for corporate control. Besides, the external governance mechanism of regulation and supervision is hindered because of the opacity of banks. On the other hand, government involvement in the banking sector exacerbates corporate governance problems in banks. Deposit insurance and implicit or explicit government guarantees on bank liabilities virtually eliminate any efforts by debtors to monitormanagers; regulation and supervision of banks limit competition and takeovers in banking.On the basis of the generic model of corporate governance, taking into account the specialties of the corporate governance of banks, this thesis constructs a general framework for the analysis of the corporate governance mechanism of banks, we believe, the regulation and supervision of banks and non-finzncial firms. On the one hand, regulation and supervision create constrains on market forces. On the other hand,as an external force, regulation and supervision have great impact on the incentives of the owners and managers of banks, which is different from scenario of non-financial firms. Similarly, the specialties of banks also affect the effectiveness of the mechanism of product market, manager market and the market for corporate control.In the last part of the thesis, based on the theoretical analysis of the previous chapters, we examine the status of corporate governance of banks in China through some empirical studies. To address the problems of corporate governance of banks in China, we put forward a proposal to improve the corporate governance of banks in China.