We study regulatory enforcement actions issued against US banks to show that both board monitoring and advising are effective in preventing misconduct by banks. While better monitoring by boards prevents all categories of misconduct, better advising prevents misconduct of a technical nature. Board monitoring increases the likelihood that misconduct is detected, increases the penalties imposed on the CEO and alleviates shareholder wealth losses following the detection of misconduct by regulators. Our paper offers novel insights on how to structure bank boards to prevent bank misconduct.
|Journal||Review of Finance|
|Early online date||11 Apr 2015|
|Publication status||Published - Mar 2016|
- enforcement actions
- board monitoring
- board advising