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Corporate governance practices and regulations

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Corporate Governance of Financial
Institutions
Mafaz Ahmad Khan
57-E
BBA(Afternoon) 8th Semester
IBA (Punjab University)
Financial Institution
Ma'am Labiba Sheikh
IBA-(Punjab University)
April 25, 2013

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The Financial Crunch of 2008 has filled the air of the globe with much apprehension regarding
the financial system of countries. Much research has been conducted as to the factors
contributing to the crisis and most of the evidence points towards factors related to financial
institutions as the major contributors. In a nutshell high borrowing with less or no monitoring has
been attributed to the crisis.
This article takes a panoramic view of the financial system of the U.S in order to suggest
remedies for the destruction caused by the crunch and also improve the financial system. The
reasons have been segregated into three broader aspects namely governance of financial
institutions, information disclosure by financial institutions and the role of market participants
and government in bringing about a development in the financial system.
The article takes its start from drawing a picture of a good financial institution. Here, the
author has briefly described all the solutions of problems faced by the system. For instance, it
says the principal-agent problems between the management can be resolved by making them as
responsible as possible for value maximization of business association. Although it is often
observed that the empirical results are mingled but such value maximization is crucial for
resolving the problems facing poorly managed firms. Similarly equity-based compensation as
well as market for corporate governance plays an important role in enhancing the management
and aligning interests of stakeholders.
The article then goes on to explain corporate governance as a vital tool for success of
financial institutions just like non-financial ones. It says that for the governance of financial
institutions, it is important for the body to possess both skills and willingness to do so which
comes from The Board of directors who are the key players in giving directions to these

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Corporate Governance of Financial Institutions Mafaz Ahmad Khan 57-E BBA(Afternoon) 8th Semester IBA (Punjab University) Financial Institution Ma'am Labiba Sheikh IBA-(Punjab University) April 25, 2013 The Financial Crunch of 2008 has filled the air of the globe with much apprehension regarding the financial system of countries. Much research has been conducted as to the factors contributing to the crisis and most of the evidence points towards factors related to financial institutions as the major contributors. In a nutshell high borrowing with less or no monitoring has been attributed to the crisis. This article takes a panoramic view of the financial system of the U.S in order to suggest remedies for the destruction caused by the crunch and also improve the financial system. The reasons have been segregated into three broader aspects namely governance of financial institutions, information disclosure by financial institutions and the role of market participants and government in bringing about a development in the financial system. The article takes its start from drawing a picture of a good financial institution. Here, the author has briefly described all the solutions ...
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