1. Theory and Corporate Governance of Financial Institutions.
- Author
-
Makina, Daniel
- Subjects
CORPORATE governance ,FINANCIAL institutions ,BANKING industry ,BUSINESS failures ,HOUSEHOLDS - Abstract
The paper reviews theories of corporate governance with regard to financial institutions, in particular, the banking sector. The conventional theory underlying corporate governance does not suggest a differential approach to its application among different organisations. While many organisations subscribe to some form of corporate governance, the manner the principles are applied vary from one organisation to another, one sector to another and one country to another. Financial institutions are a special category of corporations because of the various services they provide to the sectors of the economy, their failure of which can be costly to society (e.g. the effects of the Global Financial Crisis, 2007-2009). The negative externalities that can affect households and firms when there is a breakdown in the provision of financial services arguably justify regulation. Thus, the governance mechanisms that safeguard the interests of shareholders in conventional corporate structures might not be adequate in the case of financial institutions. Cognisant that there is little research regarding corporate governance of financial institutions including Islamic banks, this paper reviews contemporary literature on the subject matter and provides further insights. [ABSTRACT FROM AUTHOR]
- Published
- 2017