@article{60ef82d89b2544b3af4d4ddae71d4b4d,
title = "Corporate Governance and the Insolvency Risk of Financial Institutions",
abstract = "We investigate whether shareholder-friendliness of corporate governance mechanisms is related to the insolvency risk of financial institutions. Using a large sample of U.S. financial institutions over the period 2005–2010, we find that corporate governance is positively related to the insolvency risk of financial institutions as proxied by Merton's distance to default measure and credit default swap (CDS) spread. We also find that “stronger” corporate governance increases insolvency risk relatively more for larger financial institutions and during the period of the financial crisis. Lastly, our results suggest that shareholder-friendliness of corporate governance mechanisms is viewed unfavorably in the bond market.",
author = "Searat Ali and Nazim Hussain and Jamshed Iqbal",
note = "Funding Information: We thank Shams Pathan, Steve Swidler, Sami V{\"a}h{\"a}maa, James Gilkeson, Antonio-Trujilo-Ponce, Qiongbing Wu, Janne {\"A}ij{\"o}, Bj{\"o}rn Rock and participants at the 2018 Financial Markets & Corporate Governance Conference, the 29th Australasian Finance and Banking Conference, International Finance and Banking Society (IFABS) 2017 Oxford Conference, and Finance Seminar at University of Vaasa for the valuable comments and suggestions. J. Iqbal gratefully acknowledges the financial support of the Marcus Wallenbergin foundation, Finnish Foundation for Economic Education, OP Group Research Foundation and S{\"a}{\"a}st{\"o}pankkien Tutkimuss{\"a}{\"a}ti{\"o} for this project. Part of this paper was written while J. Iqbal was visiting the University of Groningen. Any errors are our own. Publisher Copyright: {\textcopyright} 2020 Elsevier Inc.",
year = "2021",
month = jan,
doi = "10.1016/j.najef.2020.101311",
language = "English",
volume = "55",
journal = "North American Journal of Economics and Finance",
issn = "1062-9408",
publisher = "ELSEVIER SCIENCE INC",
}