James F. Nielsen

Board Independence and Compensation Policies in Large Bank Holding Companies

We use a sample of large bank holding companies to empirically examine the association between financial performance and organizational structure. We regress firm accounting performance on measures of board independence, CEO pay-performance sensitivity, the product of board independence and CEO pay-performance sensitivity, and other organizational features and control variables. We find that both CEO pay-performance sensitivity and the relative tenure of independent outside directors have a positive effect on accounting performance. Their interactive effect tends to be negative. Thus, the marginal value of each mechanism for accounting performance declines as the use of the other mechanism increases. These results are robust in a simultaneous equations framework that accounts for endogeneity issues. We also find a positive relation between the percentage of independent outside directors and CEO pay-performance sensitivity.

Company Performance, Corporate Governance, and CEO Compensation in Norway and Sweden

This paper examines the relationshipamong company performance, corporategovernance arrangements, and CEO compensationwithin the Scandinavian countries of Norway andSweden. Our sample consists of 224 tradedcompanies, 120 of which are from Norway and 104from Sweden. The empirical evidence fromboth Norway and Sweden reveals significantpositive relationships among board size andCEO compensation, foreign board membership andCEO compensation, and market capitalization andCEO compensation. A significant negativerelationship is found between CEO ownership andCEO compensation. In addition, no significantrelationship is found between companyperformance and CEO compensation or CEO tenureand CEO compensation, except in the case ofNorwegian firms when a change in market-to-bookperformance measure is used. Despite itslimited geographical scope, the study adds toour general understanding of internationalcorporate governance issues.

A Financial Analysis of Acquisition and Merger Premiums

The current merger movement has been characterized by the willingness of the management of some acquiring companies to pay substantial merger premiums. A merger premium exists when the common stockholders of an acquired company receive cash and/or securities possessing a value greater than the companys premerger market value. The rationalization or justification of these “premiums†is based on a merger synergy concept. Contemporary merger literature recognizes two broad forms of merger synergy — the potential for greater operating efficiencies [14] and/or potential financial benefits — with the latter containing instantaneous [12] and real elements [1, 7, 9, 10, 11, 13].

Business banking in Australia: a comparison of expectations

Addresses the question of how well the banking industry in Australia understands the needs of their business customers. It is based on a nationwide survey of chief executive officers of 2,500 business firms and 25 banks conducted during 1996. In the survey, both groups were asked to rank those factors they consider most important in the bank selection process. Overall, significant differences were found in six out of 15 factors. When the responses were analyzed on the basis of market segment served, we found that Australian bankers have missed the mark when it comes to the issues of competitive prices and service delivery. These results will no doubt have an impact on the marketing efforts of Australian banks as they move into the twentieth century. They should also be useful to firms currently operating in Australia or firms interested in doing so in the future.

The Effects of Conglomerate Merger Activity on Systematic Risk

The study initially examined the immediate effects that conglomerate acquisitions have on the beta level of conglomerate and nonconglomerate acquiring firms. An analysis was then made of the long-run beta trends of firms that actively engage in conglomerate mergers. The results of the short-term comparative analysis have indicated that systematic risk behavior tends to be responsive in varying degrees to major conglomerate merger activity—with betas changing as a function of the combined premerger values and I 2 measures showing improvement upon acquisition. At the same time, the regression results clearly revealed that the responsiveness of I² to premerger marketrelated variables was considerably greater for the nonconglomerate firms. In contrast, the results of the comparative long-term analysis suggested that the differential effects of conglomerate merger activity on systematic risk are more of a marginal or limited nature. That is, unless the firm conducted extensive merger activity, the long-run performance of I² and I 2 indicated that conglomerate mergers have only contributed to increased absolute and relative systematic risk levels—the same pattern exhibited by the nonconglomerate, nonmerging sample.

The association between bank performance, board independence, and CEO pay‐performance sensitivity

Outlines previous research on the links between board composition, firm performance and chief executive officer (CEO) compensation, and presents a study of CEO pay‐performance sensitivity, board independence and performance in the US banking industry. Explains the methodology and presents the results, suggesting that for large bank holding companies with average performance, increased board independence reduces pay‐performance sensitivity because internal monitoring is sufficient without extra alignment incentives. Adds that when performance is poor this no longer holds true and compensation contracts are then used to align the interests of managers and shareholders.

The bank selection process and market definition in Australia

This paper examines the Australian Competition and Consumer Commission’s (ACCC) approach to market definition in light of bank mergers within the country of Australia. It considers whether or not the ACCC’s approach is consistent with the actual bank selection criteria of a nationwide sample of 2,500 business firms. Empirical evidence reveals that a regulatory approach of defining bank markets based on distinct products may only be serving the interest of large business firms. The interest of small business firms may be better served under the more traditional approach of defining bank markets based on product clusters.

The Evolution of Commercial Banking in Georgia, 1991-2001

This paper investigates the Georgian experiment in transition banking since the countrys break from the former Soviet Union in 1991. By analysing the policies pursued by the National Bank of Georgia (NBG) between 1991 and 2001 and the outcomes of those policies, the paper attempts to compare and contrast the general performance of the Georgian banks with banks in other transition economies. On the basis of this investigation, we conclude that even though substantial progress has been made, the Republic still lags behind leading transition and developed market economies in terms of financial development. Much of the success of restructuring can be attributed to the NBG, the government, and the multi laterals (IMF and donor nations). Nevertheless, a full-flowering of financial institutions and performance will not come without further economic development and reform of public institutions and the attendant increase in public confidence in the financial system as a whole.

An investigation of cultural cohesion in a community bank

This study examines the culture of a medium-sized community bank based in the Western United States. The study aims to identify the organizations culture and then measure the level of cultural cohesion that exists three years after a major cultural campaign was launched. The cultural characteristics the organization valued most highly were integrity, willingness to serve the customer and teamwork - all components of the official bank document on culture. Interestingly, the analysis uncovered some significant value differences among different employee groups and also employees and management; differences which can affect firm performance levels. The analysis also revealed that changing the culture in an organization does not necessarily lead to cultural cohesion.