This document includes nine research papers that aim to identify and understand the key factors affecting governance and culture in the banking industry. The volume is divided into two complementary parts. Part I introduces the concept of culture and its importance to risk management and financial stability. The articles present a framework for diagnosing and changing culture, describe how corporate culture is shaped, explore the importance of effective risk management, and examine the roles of deferred cash compensation and bank cash holdings in promoting financial stability. Part II assesses critical areas of corporate governance: the role of boards of directors, the monitoring function of large outside shareholders, the importance of financial disclosure and transparency, and the relationship between banks’ disclosure practices and performance. The appendix to the volume provides an extensive list of additional questions for future research. These questions extend and augment the important research presented in the volume and should help advance the burgeoning study of the role of culture and governance in banking.
Behavioral Risk Management in the Financial Services Industry The Role of Culture, Governance, and Financial Reporting
Federal Reserve Bank of New York
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