Corporate Governance Dynamics and Quality of Bank and Insurance Boards An empirical study based on global data

Sarkar Kabir, Md Hamid Uddin, Rashedul Hasan

Research output: Working paper

Abstract

The global financial crisis highlights the need for an effective governance mechanism in the financial sector. In contrast to the insurance companies, banks are operating in a highly regulatory environment globally. Unlike the banks, insurance companies are not operating under a unique set of governance standards appropriate for the nature of their business. It means Insurance firms are more susceptible to agency problems in comparison to banks. Taking this context into account, we investigate if board quality varies across banking and insurance firms. The study based on eight years' data for 455 banks and 137 insurance firms from 28 countries finds that insurance firms have a low-quality corporate board as compared to banks. The reasons include: Insurance firms, in comparison to banks, are less likely to have an audit committee and infrequently meeting if they have an audit committee, high existence of CEO duality and involvement in the nomination committees, long-serving CEOs, gender imbalance in the board, fewer independent directors, and higher percentage of directors' ownership. The findings persist across all subsamples except that insurance companies operating in highly corrupt countries have a superior quality board in contrast to a bank. Finally, we confirm that higher agency problem leads to the deterioration of the quality of Insurance boards relative to those of the banks.
Original languageEnglish
Number of pages34
Publication statusIn preparation - 2019

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Insurance
Corporate governance
Empirical study
Insurance companies
Audit committee
Agency problems
Financial sector
Ownership
Global financial crisis
Governance mechanisms
Corporate boards
Chief executive officer
Imbalance
Independent directors
Deterioration
Regulatory environment
Governance
CEO duality
Banking

Keywords

  • Governance
  • Board Quality
  • Insurance
  • Bank
  • Agency cost

Cite this

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