Financial Corporate Governance Issues To Study

After the finance crisis of2008, it is known that the failure of big financeinstitution may lead to the collapse of the whole finance system，concerned the typicalcharacter of the global finance system. Global supervision as well as corporategovernance is important to help finance institutions and the whole system against thecrisis. In this paper, endogenous financial regulation was drew to describe the balancestate of global supervision and corporate governance in both macro and micro level.The concept of endogenous financial regulation will be reached, only if the externalsupervision and internal supervision have been matched. There are two approaches toachieve endogenous financial regulation:1. Establishment of a global comprehensivemonitoring system.2. Financial institutions establish a real-time risk monitoringsystem in level of corporate governance. Due to the practical difficulties in the firstapproach, the second way is the key to endogenous financial regulation. In this paper,the evolution of the international and domestic regulatory logic and regulatory meanswere discussed. At board level，the effectiveness of risk management was not goodenough after the financial crisis. The principal focus of this paper is on commercialbanks, but many other major financial institutions are relevant. By establishing amathematical model to analyse state-owned shares of the commercial banks, I studiedthe behavior patterns of professional managers, as well as “Holder Absence" causedby dual agency.Though the investigationg, I founded that state-owned shares have thepotential to be a suitable match subjet to endogenous financial regulation. The studyshows that the professional managers of state-controlled commercial banks have theincentive to give priority to achieve policy objectives rather than economic goals ofthe corporations; dual agency problem may lead to "Holder Absence ". In order toinvestigate the governance of financial institutions on corporate performance, weconstructed the index system of governance of financial institutions. The systemincludes the size of Board of Directors and Supervisory Board、the managementincentive payment、corporate development opportunities, and value of the stock. Thestudy finds that the supervise function of the supervision Board is better thanindependent directors; financial regulation index system like CAR(capital adequacyratio), NPL(non-perfoming loan) affects the ROA(return of assets) in a very limitedway; executive compensation incentive effect is far less than equity incentive，equityincentive could to be an important tool of “endogenous financial regulation”; Theadvantages of scale in banking are highlighting; the impact of board size on corporate performance is not clear yet. I founded equity incentive could be a suitable tool topurchase the endogenous financial regulation. The endogenous indicators of financialregulation was drew with financial institutions attempting to decrease the possibilityof the potential systematic risk by building a new system of governance, in that way,the financial crisis likes2008will become controllable. Maybe only when real-timefinancial institutions monitoring complemented by clear defined limitation offinancial institutions，the current financial crisis could be coped with better.