CORPORATE GOVERNANCE IN THE STATE-OWNED BANKS

Abstract

In the article, based on application of agency theory, the specifics of corporate governance in state-owned banks are highlighted. It is determined that the key distinction of state-owned banks is the fact that a state simultaneously can act as an owner, manager, creditor and regulator. The differences of corporate relations in state-owned banks such as the more complicated multilevel system of agency relations, the higher level of information asymmetry and risk of agent’s opportunism, the another character of trust manifestation are substantiated. It is highlighted that the presence of complicated corporate relations causes the following risks: the state as an agent of population may be ineffective and use the state-owned banks not so for ensuring of socio-economic development, as for financing the state’s projects or state-owned enterprises; in the case of certain political forces’ impact on the formation of the government the state-owned banks activities may be subordinated by motives of certain politicians, interested in using of state-owned banks for achieving their own political goals; the ineffective multi-level delegation of management, monitoring and regulation functions can lead to inefficiencies of state-owned banks in general; the lobbying of state-owned banks’ interests may lead to the breach of competitive environment of financial market, manipulation of movement of credit and investment resources etc. The hypotheses, regarding to the factors that can be decisive for the effective corporate governance in the state-owned banks, are formulated. As main factors which may determine the efficiency of corporate governance in the state-owned banks are considered follow: the structure and composition of agency contracts of management in the state-owned banks, level of banking regulator independence and character of its relations with state-owned banks and other government structures; the formation of supervisory boards, taking into account the absence of political engagement of supervisory boards, the appropriate level of professionalism and reputation, the presence of independent members, the application other procedures for the selection of state-owned banks managers, based on the balance of all stakeholders’ interests; the appropriate balanced level of transparency.

Keywords

• the agency theory
• agency relations
• state-owned banks
• information asymmetry
• corporate governance in the state-owned banks
• opportunism.