Iqtisodiy taraqqiyot va tahlil, 2024-yil, iyun
www.e-itt.uz
88
THE IMPACT OF CORPOPRATE GOVERNANCE ON THE FINANCIAL STABILITY
OF BANKS: AN INTERNATIONAL COMPARATIVE ANALYSIS
Ismoilova Shaxzoda Alisherovna
Tashkent State University of Economics
shaxzodaismailova0910@gmail.com
ORCID: 0009-0002-9433-1996
Urinov Bobur Nasilloyevich
Tashkent State University of Economics
ORCID: 0000-0001-7276-2619
Abstract.
These findings underscore the need for context-specific corporate governance
models to optimize overall financial performance and mitigate risk. This research contributes to
the understanding of how multiple governance models affect bank stability globally and provides
information for policy makers and bank executives aiming to improve governance frameworks.
These findings underscore the need for context-specific ways of corporate governance to optimize
economic performance and mitigate risk. This research contributes to the expert knowledge of the
ways in which different governance models affect the global stability of financial institutions and
provides information for policymakers and bank executives aiming to improve governance
frameworks.
Keywords:
Corporate governance, financial stability, banks, models, Anglo-American,
German, Japanes
eʼs model, board structure, transparency, risk management, multiv
ariate
regression analysis, USA, UK, Germany, Japan, China.
KORPORATIV BOSHQARUVNING BANKLARNING MOLIYAVIY BARQARORLIGIGA TA’SIRI:
XALQARO QIYOSIY TAHLIL
Ismoilova Shaxzoda Alisherovna
Toshkent davlat iqtisodiyot universiteti
Urinov Bobur Nasilloyevich
Toshkent davlat iqtisodiyot universiteti
Annotatsiya.
Ushbu natijalar umumiy moliyaviy koʻrsatkichlarni optimallashtirish va xavfni
kamaytirish uchun kontekstga sezgir korporativ boshqaruv modellarini yaratish zarurligini
taʼkidlaydi. Ushbu tadqiqot bir nechta boshqaruv modellari butun dunyo boʻylab banklar
barqarorligiga qanday taʼsir qilishini tushunishga hissa qoʻshadi va boshqaruvni yaxshilashga
intilayotgan siyosatchilar va bank menejerla
riga maʼlumot beradi. Ushbu nat
ijalar iqtisodiy
samaradorlikni optimallashtirish va xavfni kamaytirish uchun korporativ boshqaruvning oʻziga xos
usullariga ehtiyoj borligini taʼkidlaydi. Ushbu tadqiqot boshqaruvning turli modellari moliya
institutlarining global barqarorligiga qanday ta
ʼ
sir etishi haqidagi ekspert bilimlariga hissa
qoʻshadi va boshqaruv tuzilmalarini yaxshilashga intilayotgan siyosatchilar va bank rahbarlariga
maʼlumot beradi.
Kalit soʻzlar:
Korporativ boshqaruv, moliyaviy barqarorlik, banklar, modellar, ingliz-
amerika,
nemis, yapon modeli, boshqaruv kengashi tuzilmasi, shaffoflik, risklarni boshqarish, koʻp
oʻlchovli regressiya tahlili, AQSH, Buyuk Britaniya, Germaniya, Yaponiya, Xitoy.
UO
‘
K: 347.965.8
VI SON
—
IYUN, 2024
88-95
Iqtisodiy taraqqiyot va tahlil, 2024-yil, iyun
www.e-itt.uz
89
ВЛИЯНИЕ КОРПОРАТИВНОГО УПРАВЛЕНИЯ НА ФИНАНСОВУЮ СТАБИЛЬНОСТЬ
БАНКОВ: МЕЖДУНАРОДНЫЙ СРАВНИТЕЛЬНЫЙ АНАЛИЗ
Исмоилова Шахзода Алишеровна
Ташкентский государственный экономический университет
Уринов Бобур Насиллоевич
Ташкентский государственный экономический университет
Аннотация.
Эти результаты подчеркивают
необходимость создания моделей
корпоративного управления, учитывающих контекст, для оптимизации общих
финансовых показателей и снижения рисков. Это исследование способствует пониманию
того, как многочисленные модели управления влияют на стабильность банков
во всем
мире, и предоставляет информацию политикам и руководителям банков, стремящимся
улучшить систему управления. Эти результаты подчеркивают необходимость в
конкретных способах корпоративного управления для оптимизации экономических
показателей и снижения рисков. Это исследование способствует экспертному знанию
того, как различные модели управления влияют на глобальную стабильность финансовых
учреждений, и предоставляет информацию политикам и руководителям банков,
стремящимся улучшить структуру управления.
Ключевые слова:
Корпоративное управление, финансовая стабильность, банки,
модели, англо
-
американская, немецкая, японская модель, структура правления,
прозрачность, управление рисками, многомерный регрессионный анализ, США,
Великобритания, Германия, Япония, Китай.
Introduction.
Corporate governance, which includes the systems, ideas and strategies by which
corporations are managed and controlled, plays a key role in banking. Effective corporate
governance ensures that banks operate transparently, manage risks effectively and maintain
investor confidence, all of which can be key to financial stability. As the banking zone will become
more and more globalized, it is of utmost importance to know how exclusive corporate
governance practices affect the stability and reliability of banks.
Banks are inherently complex institutions that handle enormous amounts of risk. The 2008
financial crisis highlighted the critical need for strong corporate governance in maintaining cash
balance. Poor governance practices were recognized as a key contributing factor to the disaster,
particularly with major regulatory reforms aimed at strengthening governance frameworks in
banks. These reforms emphasized the importance of board independence, transparency,
contingency control and accountability (Kirkpatrick, 2009).
However, the effectiveness of corporate governance practices can vary widely across
countries due to variations in regulatory environments, market systems, cultural elements and
currency situations. Moreover, for example, governance models accepted in Anglo-American
countries that prioritize shareholder value and board independence may differ from those in
international locations such as Germany and Japan, where stakeholder engagement and worker
participation are more common.
Literature review.
A comprehensive analysis of various studies underlines the essential function of corporate
governance in ensuring the economic stability of banks.
Douglas Weimer and Richard Pape (1999) compared the unique government models with
the Anglo-American and German models and concluded that each model has amazing power in
promoting monetary balance, with the Anglo-American version emphasizing market
mechanisms and the Price for shareholders. and the German model, which focuses on a
stakeholder-oriented approach.
Iqtisodiy taraqqiyot va tahlil, 2024-yil, iyun
www.e-itt.uz
90
Renee Adams and Hamid Mehran (2003) found that the composition and shape of a
financial institutionʼs board of directors has a noticeable impact on the economic stability of
banks and its economic stability. Banks with a higher percentage of unbiased directors tend to
have better oversight, reduce erratic behavior, and improve resilience to financial difficulties.
Similarly, Bushman and Smith (2003) emphasized the importance of transparency and the best
economic reporting to maintain investor confidence and market discipline and concluded that
effective disclosure practices are important to enable stakeholders to to make informed
decisions and prevent economic crises.
Daniel Cohen, Aiyesha Dey, and Thomas Lys (2007) examined the impact of corporate
governance reforms, particularly the Sarbanes-Oxley Act, on the stability and accountability of
economic institutions. In their view, these reforms led to greater transparency and
accountability, thereby contributing to better monetary stability.
Among these scientists are ours who have conducted research on this topic. For example,
we can cite Urinov, Kenjayeva (2023), who deals in detail with the topic of corporate governance
models in his article entitled “ADVANCED PRACTICES AND MODELS OF CORPOPRATE
GOVERNANCE”
. They examined the advantages and disadvantages of all models, the aspects that
unite them and the characteristics of each model.
Ashurov in his work “Improving corporate governance in commercial banks as a factor for
sustainable development” (2014). “Banking and Financial System” writes: One of the factors that
contribute to the successful development of the national economy is the sustainable functioning
of the banking and financial system. The establishment and further development of a flexible
bank management structure, which we also call corporate governance, plays an important role.
This article discusses the measures taken to implement a modern corporate governance system
for banks, which have led to an increase in the role of shareholders and bank boards of directors
in bank management, as well as the creation of effective mechanisms to protect the interests and
rights of shareholders. His other works also provide the opportunity to get an idea of the
importance and relevance of corporate governance in every country today.
These studies particularly emphasize the importance of board structure, transparency and
disclosure, robust emergency control procedures, investor protection, corporate governance
reforms and the strengths of different governance models in ensuring the economic stability of
banks in different international contexts.
Methodology.
The method of studies for this view includes a systematic evaluation of corporate
governance practices and fashions across different nations, supplemented by a comprehensive
evaluation of applicable literature. This approach guarantees solid know-how of the influence of
corporate governance on the monetary stability of banks. The technique consists of several key
components:
The core of the research technique is the systematic analysis of procedures and models of
corporate governance. This includes a review of various corporate governance frameworks
commissioned through banks in the US, UK, Germany, Japan and China. This assessment consists
of expertise on the structural and procedural aspects of governance in each context, specializing
in identifying key characteristics such as board independence, the presence of risk review
committees and the frequency of board meetings. Detailed facts about on-board systems, chance
management practices and transparency measures are collected from several assets, including
annual audits, regulatory reporting and specialized financial databases. For example, annual
reports provide information on management systems and overall financial performance, while
regulatory reporting (e.g., SEC reporting in the US) provides additional information on
compliance and management practices.
A thorough review of the relevant literature that inspired this study. The literature review
method involves identifying key and cutting-edge research articles, books and reports that
Iqtisodiy taraqqiyot va tahlil, 2024-yil, iyun
www.e-itt.uz
91
examine the relationship between corporate governance and economic stability. Notable studies
include works by Adams and Mehran (2003) on bank governance and Leaven and Levine (2009)
on the impact of law and governance on risk taking. Integrating findings from the literature helps
identify common themes, divergent views, and gaps in current research, thereby strengthening
the broader context and theoretical underpinnings of corporate governance practices.
Various scientific research methods are used to embellish the rigor and validity of the view.
These consist of generalizations, meaning drawing broad conclusions from specific instances of
corporate governance practices found in the sampled banks, helping to understand overarching
developments and concepts across specific contexts. Grouping banks based on common
characteristics along with governance structures, regulatory environments and geographies
allows for more accurate benchmarking. The comparison includes a systematic comparison of
governance practices and their consequences across exceptional countries to perceive styles and
variations, and to highlight how exclusive modes of governance affect monetary balance. The
analysis involves breaking down complex governance and monetary statistics into possible
additives to understand the underlying relationships and mechanisms relating to the statistical
evaluation of key variables. Synthesis combines insights from unique sources and strategies to
create coherent and comprehensive information on how corporate governance affects monetary
stability.
Analysis and results.
Currently, examining various corporate governance frameworks and their implications for
banking stability represents a pressing endeavor. Across the globe, diverse models of corporate
governance are implemented in practice, with each country tailoring its approach based on
unique contextual factors. These models generally fall into three primary categories.
Corporate governance entails a system of interactions among executives, board members,
shareholders, and stakeholders involved in company management. This system influences not
only the profits of company owners but also the future investment prospects of the organization
(Urinov, Kenjayeva, 2023).
Anglo-American or outsider model.
The Anglo-American or outsider model, as mentioned
above, represents a governance framework for publicly traded corporations. It relies on external
market mechanisms to exert significant control over the management or operational aspects of
such companies. This model is prevalent in countries like the United States, Great Britain, Canada,
and New Zealand. Within this setup, shareholder interests are represented by a diverse array of
investors, whose influence depends on the governance structure of the corporation. Operational
decision-making within the corporation is typically delegated to professional managers.
However, a primary challenge associated with this model lies in managing the relationships
between company founders and the engaged managerial personnel. In such scenarios, the role
of the stock market, which plays a pivotal role in overseeing the management of the corporation,
becomes increasingly important. The key participants in this model include managers, directors
(board of directors), and investors. Additionally, consulting firms providing corporate
governance and fiduciary voting advisory services to government entities, stock exchanges, self-
regulatory bodies, corporations, and investors are also involved.
Among the countries implementing the Anglo-American model of corporate governance,
the United States has the most stringent standards for information disclosure. Other countries
following this model also prioritize transparency, but in the United States, corporations are
required to disclose various information quarterly.
The impact of the Anglo-American corporate governance model on the financial stability of
banks can be either positive or negative, depending on the specific implementation and context
of application. Some aspects that may have an impact on the financial stability of banks under
this model include:
Iqtisodiy taraqqiyot va tahlil, 2024-yil, iyun
www.e-itt.uz
92
-
Effective risk management: Corporate governance systems, in accordance with the Anglo-
American model, can contribute to the development and implementation of effective risk
management practices in banks. The presence of independent directors on the board of directors
and active participation of stakeholders in the strategic decision-making process can help
identify and manage risks, which, in turn, contributes to the financial stability of the bank.
-
Transparency and market trust: The Anglo-American model emphasizes transparency
and openness in corporate governance, which promotes trust among investors and the market
as a whole. A bankʼs credibility can be enhanced by clear and accessible reporting, which can
reduce its cost of capital and strengthen its financial position.
-
Management rewards and incentives: The Anglo-American model of corporate
governance often assumes a close link between management compensation and the financial
success of the company. This can encourage the bankʼs management to make decisions aimed at
improving the financial performance and stability of the bank as a whole.
-
Market for Corporate Advocacy: Under the Anglo-American model, there is an active
market for corporate advocacy, including opportunities for investors to express their interests
through active participation in shareholder meetings, litigation and other mechanisms. This can
help prevent undesirable practices and improve corporate responsibility.
However, the Anglo-American model can also have a negative impact on the financial
stability of banks if risk is poorly managed, is too short-term focused, and lacks sufficient
consideration for the interests of other stakeholders, such as employees and society at large.
Such problems can lead to the risk of financial instability and loss of confidence from investors
and the public.
The continental (German) or insider model
embodies a governance framework for joint-
stock companies, emphasizing internal methods of corporate control or self-regulation. This
model, typical of Central and Western European countries such as Germany, Holland,
Switzerland, Austria, Norway, Scandinavian countries, Belgium, and France, operates on the
principle of social interaction. In this model, all stakeholders, including shareholders, managers,
employees, banks, and public organizations, have the right to participate in the decision-making
process of the joint-stock company. Unlike the Anglo-American model, the German model places
less emphasis on stock markets and shareholder value in management, as companies prioritize
controlling their own competitiveness and performance.
The development of this model was influenced by various objective and subjective factors.
Notably, the high concentration of share capital played a significant role, leading to the
dominance of banks in corporate decision-making. In large companies, a considerable portion of
shares (over 40%) is owned by five major shareholders, resulting in less liquidity in the stock
market compared to the United States and Great Britain. Consequently, the continental model
exhibits higher levels of ownership concentration, with strategic investors holding blocked share
packages, primarily led by banks. In recent years, there has been an increasing influence of
foreign investors on management practices based on the German model.
The Anglo-American and German models of corporate governance represent two
conflicting systems that reflect the national characteristics of their respective countries. These
models consist of various options, each prioritizing different aspects, such as shareholder
interests or social interaction, based on the predominant principles of their system.
The impact of the German corporate governance version at the monetary stability of banks
can be decided through a range of factors characteristic of this model.
-
Social interplay: The German model emphasizes the participation of all stakeholders,
together with shareholders, managers, employees, banks and public corporations, in the
selection-making technique. This promotes a balanced technique to governance, which could
assist boom believe and stability in the banking sector.
-
High awareness of proportion capital: Germany has a high awareness of percentage
capital, which guarantees the leading position of banks in corporate governance. This can make
Iqtisodiy taraqqiyot va tahlil, 2024-yil, iyun
www.e-itt.uz
93
contributions to extra powerful manage over the activities of banks and decrease the likelihood
of taking unstable decisions.
-
Stable lengthy-time period relationships with banks: German organizations frequently
maintain long-term relationships with banks, which contributes to the steadiness of financial
planning and investing. This can reduce the likelihood of monetary crises and increase the
steadiness of banks.
-
Features of transparency and lengthy-termism: In Germany, there is a unique emphasis
on transparency and long-term management of groups, that can contribute to extra stable and
dependable economic reporting of banks, which in turn contributes to expanded investor self-
belief and stability of monetary markets.
Overall, the German corporate governance model can have a high-quality effect at the
financial balance of banks with the aid of growing a more sustainable and long-term governance
strategy focused on social interaction and a high diploma of transparency.
Japanʼs model
of corporate governance changed to a post-World War II form based on
financial-commercial corporations (keiretsu), stimulated
by the countryʼs political economic
situation, culture and traditions, and characterized by a completely closed bank-based
establishment. supervision that makes it possible to reduce the difficulty of controlling
managers.
The Japanese version of corporate governance is multifaceted and is based around a middle
(front) financial institution and a financial business organization (chain) or keiretsu. "The major
financial institutions and keiretsu are exceptional, but the factors of the Japanese model
complement each other. Virtually all Japanese businesses have close relationships with their
shadow banks. The bank provides loans to its corporate customers, issues bonds, stocks, and
offers account protection." numbers and providing advice offers.
This model is characterized by the accumulation of a large part of the assets in the hands of
massive and medium-sized shareholders who own shares in organizations protected by
"keiretsu". This means that 70% of the shares of joint stock companies belong to monetary
institutions, but monitoring the liking of corporations is no longer most effective with the help
of their shareholders, but in addition through the principle of the monetary institution, which is
taken into account to consider as the main creditor. Keiretsu is usually prepared around an
unmarried large bank that could provide funding for all groups in a financial-commercial
institution.
Boards of Japanese corporations are larger than those in the US, UK or Germany, with an
average of fifty contributors. If
the corporationʼs income is lower in a certain time frame, the
primary bank and keiretsu participants can support the administrator and appoint their
personal nominees. Another custom typical of the Japanese kingdom is the inclusion of former
heads of vari
ous ministries and enterprises in the companyʼs board of directors. For example,
the Japanese Ministry of Finance may additionally appoint a retired government member to the
board of directors of a financial institution. In the Japanese version, the composition of the board
depends on the financial circumstances of the employer.
As a result of changes in regulation in the United States in recent years, the Japanese version
of corporate governance has begun to have a bad impact on effective development. The reason
is that, thanks to the boom in overseas institutional investors in the US, Japanese businesses have
become more recognized by the market, shareholders and, moreover, in the Anglo-American
version.
The impact of the Japanese version of corporate governance on the monetary stability of
banks can be determined using the following options of this model:
-
Long-term relationships with banks: In the Japanese version, groups usually maintain
long-term relationships with banks, referred to as "keiretsu". These relationships are
characterized by mutual financial provision and mutual assistance between banks and
Iqtisodiy taraqqiyot va tahlil, 2024-yil, iyun
www.e-itt.uz
94
organizations. This can contribute to funding stability and management opportunities for banks
as they have long-term partnerships with large groups.
-
Focus on long-term results: Japanese businesses, such as banks, tend to be aware of long-
term effects rather than quick-term gains. This can contribute to the improvement of a
sustainable and long-term control method, which in turn can increase the stability of banks.
-
Government Involvement: In Japan, the government plays a vital role in regulating and
supporting the banking machine. This can help ensure the stability and soundness of banks
through various mechanisms that include requests from authorities for deposit coverage and
regulatory measures.
-
Cultural Aspects: The Japanese way of life generally promotes stability and consensus in
business relationships. This can help create a more predictable and robust banking environment
and reduce the likelihood of economic crises.
However, despite these subtle aspects, the Japanese model can also have its drawbacks,
along with gradual reactions to changes in the economy and difficulties in adapting to global
changes in the financial field. However, the Japanese model of corporate governance can
preferentially contribute to the financial balance of banks through various mechanisms that
ensure sustainable and long-term development.
Conclusion.
In conclusion, the examination of corporate governance models and their impact on the
financial stability of banks underlines the importance of informational multiple strategies across
countries of its kind. Anglo-American, German, and Japanese fashions offer accurate views on
corporate governance with astonishing implications for bank balance sheets.
The Anglo-American model favors maximizing shareholder fees and market mechanisms,
thus promoting transparency and obligation. While this version emphasizes market area and
investor activism, it could additionally face challenging situations related to short-termism and
capacity conflicts between shareholders and control.
The German model, on the other hand, emphasizes social interaction and stakeholder
participation in decision-making, selling long-term relationships and stability. However, its high
capital concentration and reliance on banks may additionally limit liquidity and versatility in
economic markets.
The Japanese model is characterized by long-term relationships and government
interventions that promote balance but potentially hinder adaptation to changes in the
international market. Despite these differences, all three methods contribute to the monetary
stability of banks through numerous mechanisms that include contingency management,
transparency, and long-term planning.
Going forward, policymakers and stakeholders need to consider the strengths and
weaknesses of each version to expand customized processes that enhance banking stability in an
increasingly interconnected global economic system. By fostering collaboration and studying
multiple governance practices, the financial sector can better manage challenges and foster
resilience in the face of uncertainty.
References:
Adams, R., & Mehran, H. (2003). Board structure, banking firm performance and the bank
holding company organizational form. FRB of New York Staff Report, (159).
Urinov B.N., Kenjayeva U. F. (2023) “ADVANCED PRACTICES AND MODELS OF CORPOPRATE
GOVERNANCE” // SCIENCE AND INNOVATION INTERNATIONAL
SCIENTIFIC JOURNAL VOLUME 2
ISSUE 1 JANUARY 2023. UIF-2022: 8.2 | ISSN: 2181-3337 | SCIENTISTS.UZ
Bushman, R. M., & Smith, A. J. (2003). Transparency, financial accounting information, and
corporate governance. FRBNY Economic Policy Review, 9(1), 65-87.
Iqtisodiy taraqqiyot va tahlil, 2024-yil, iyun
www.e-itt.uz
95
Cohen, Daniel A. and Dey, Aiyesha and Lys, Thomas Z., (2007) Real and Accrual-Based
Earnings Management in the Pre- and Post-Sarbanes Oxley Periods (June 2007). AAA 2006
Financial Accounting and Reporting Section (FARS) Meeting Paper, Available at
SSRN: https://ssrn.com/abstract=813088 or http://dx.doi.org/10.2139/ssrn.813088
Dr Zufar Ashurov (2014) “Improvement of
Corporate Governance in the Commercial Banks as
the Factor of Sustainable Develop
ment of Banking and Financial System” // National Scientific and
Practical Conference on “Sustainable Development of Banking and Financial System as the
Important Priority of
the Economic Policy of Uzbekistan”, Tashkent, Uzbekistan
Dr Zufar Ashurov (2014)
“The Corporate Governance in Uzbekistan: A special focus on the
Boardʼs Supervisory role compared with German practice” // International Scientific Journal"
Corporate Board: role, duties and composition.
Kirkpatrick, G. (2009). The Corporate Governance Lessons from the Financial Crisis. OECD
Journal: Financial Market Trends, 2009(1), 61-87.
