THE IMPORTANCE OF CORPORATE GOVERNANCE IN BANKING. EVIDENCE FROM THE BANKS LISTED AT BUCHAREST STOCK EXCHANGE

In the context of the financial market volatility and economic competitiveness, corporate governance has become an imperative for improving organizational performance and a strategic instrument for enhancing credibility of stakeholders in companies and institutions. Evidence show that at present, banks continue to have a governance problem, which poses significant risks not just to them, but potentially to the entire economy (Forth, 2012). Corporate governance is essentially important for banks, because such institutions: (a) deal with funds raised from the public; (b) are likely to encounter greater risks including frauds and failure; and (c) if such frauds or failures occur in such institutions, it may pose issues relating to public confidence in the financial system stability itself (Cabraal, 2007, p. 3). The purpose of our empitical study is to analyze the corporate governance framework of the banks listed at Bucharest Stock Exchange, in terms of: principles and practices of corporate governance, ownership and board structure, financial reporting, disclosure and transparency of information, business ethics and corporate social responsability. In this regard, we will use a quantitative approach, based upon the Annual Reports from the banks listed at Bucharest Stock Exhange indexed BET-XT. Results of the data regression analysis indicate that efficient corporate governance mechanisms have a positive impact on the financial performance and stock market valuation of the banks listed at Bucharest Stock Exchange. The analysis on financial performance on banks in terms of ROA, ROE and PER, indicates that the price share of Transilvania Bank is the most attractive for investors, with great potential of profit on a long term.