Abstract:
The most important tool for promoting the bank’s stability and health is the establishment of a standard corporate governance structure for managing the bank's business. Redesigning the relationships between bank management, shareholders and the rest of the bank’s stockholder, including the objectives, the risk and audit indices, and internal control of the bank, is recognized as the foundation of corporate governance. Good corporate governance in a bank increases productivity reduces financial risk and enhances systemic sustainability. Bad corporate governance increases the likelihood of a bank's bankruptcy and creates risks that are likely to contagion the entire banking network. In this paper, considering the importance of the corporate governance in the banking network, and issuing Central Bank circular in 2016, we will review corporate governance requirements, as well as quantify its effective indicators. To determine the corporate governance structure, we have introduced and quantified several important indicators about the board structure, internal control, and auditing of the banks. The period for the analysis of corporate governance in the banking network by indicators is 2011 to 2017. This information is extracted from financial statements or through the official website of the bank network. The results confirm that good corporate governance affects financial statement and precautionary ratios in banks.
Machine summary:
To determine the corporate governance structure, we have introduced and quantified several important indicators about the board structure, internal control, and auditing of the banks.
The main problem of implementing a good corporate governance in the Iranian banking network is the lack of a legal structure to follow the rights of minority shareholder of the bank, minimum accountability of majority shareholders, and absence of the appropriate incentives for the board of directors and managers to keep track the strategic goals of the bank.
This rating agency operates based on about 300 different criteria, which can set up these criteria in four major categories: (a) the rights and obligations of shareholders; (b) the domain of acquisition activities by the competitor; (c) disclosure of corporate governance; (d) Board structure and performance.
(Baysinger and Butler (1985); Rosenstein and Wyatt (1990); Byrd and Hickman (1992); Morck and Nakamura (1994), Kaplan and Minton (1994), Bhagat and Black Weisbach, (2002)).
3. 3 Number of Board Members Same as the independence of the Board of Directors, this section also complies with Chapter Six of the Central Bank Directive, which is very important to consider, so the number of board members has a significant impact on the quality of corporate governance.
Another dimension in three lines of defense in the standard corporate governance is to reduce the risk of an internal coalition between chief managers by using independent auditors and outside specialists of the bank.
Significance of this variable is also important for other indicators of corporate governance such as board index and internal control and auditing.