Skip to main content
SpringerLink
Log in

YES Bank fiasco: a corporate governance failure

  • Perspective Article
  • Published:
DECISION Aims and scope Submit manuscript

Abstract

Financial market has been jolted on 5 March 2020 when the central government has put YES Bank Ltd., India’s fourth largest private bank, under moratorium, and the RBI has come out with a bailout package. The former CEO had extended loans in quid pro quo non-arrangement to the companies confronting financial turmoil. Theoretically, independent directors supposed to bring independent judgement about strategy and risk management which, for the bank, has been miserably failed and has extended loans without considering the borrowers’ ability of repayment. The audit committee has too failed to show its acumen and approved the management’s proposals.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Chapter © 2015

References

  • Adams RB, Mehran H (2012) Bank board structure and performance: evidence for large bank holding companies. J Financial Intermed 21(2):243–267

    Article  Google Scholar 

  • Aebi V, Sabato G, Schmid M (2012) Risk management, corporate governance, and bank performance in the financial crisis. J Bank Finance 36:3213–3226

    Article  Google Scholar 

  • Afsharipour A (2009) Corporate governance convergence: lessons from the Indian experience. Northwest J Int Law Bus 29(2):375–402

    Google Scholar 

  • Battaglia F, Gallo A (2017) Strong boards, ownership concentration and EU banks’ systemic risk-taking: evidence from the financial crisis. J Int Financial Markets, Inst Money 46:128–146

    Article  Google Scholar 

  • Becht M, Bolton P, Röell A (2011) Why bank governance is different. Oxf Rev Econ Policy 27(3):437–463

    Article  Google Scholar 

  • Bhattacharyya, A. K. (2011, December 26). AMRI hospital fire: Corporate governance under scanner. The Business Standard, p.7.

  • Bhattacharyya AK (2015) Audit committee apathetic towards internal audit. The Business Standard, p 6

  • Bhattacharyya AK (2020) Biz judgement rule and directors’ liability. The Business Standard, p 5

  • Bhattacharyya AK, Rao SV (2004) Economic impact of regulation on corporate governance: evidence from India. Working Paper No. 486/2004. Indian Institute of Management Calcutta

  • Bhusnurmath M (2020) Make Money safe again. The Economic Times, p 10.

  • Bliss MA, Gul FA (2012) Political connection and cost of debt: Some Malaysian evidence. J Bank Finance 36(5):1520–1527

    Article  Google Scholar 

  • Bryane M (2003) Codes of corporate conduct: moving from order to progress. Corp Gov—Int J Enhancing Board Perform 3(2):29–31

    Google Scholar 

  • Caprio G, Laeven L, Levine R (2007) Governance and bank valuation. J Fin Intermed 16(4):584–617

    Article  Google Scholar 

  • Carter DA, Simkins BJ, Simpson WG (2003) Corporate governance, board diversity, and firm value. Fin Rev 38:33–53

    Article  Google Scholar 

  • Choi H, Sul W, Kee Min S (2012) Foreign board membership and firm value in Korea. ManagDecis 50(2):207–233

    Google Scholar 

  • Doldor E, Vinnicombe S, Gaughan M, Sealy R (2012) Gender diversity on boards: the appointment process and the role of executive search firms. Equal Human Right Committee Report 85:1–98

    Google Scholar 

  • Ellus A, Yerramilli V (2013) Stronger risk controls, lower risk: evidence from U.S. Bank holding companies. J Finance 48:1757–1803

    Google Scholar 

  • Faleye O, Krishnan K (2017) Risky lending: does bank corporate governance matter? J Bank Finance 83:57–69

    Article  Google Scholar 

  • Farhi E, Tirole J (2012) Collective moral hazard, maturity mismatch, and systemic bailouts. Am Econ Rev 102(1):60–93

    Article  Google Scholar 

  • Farooq MO, Elseoud MSA, Turen S, Abdulla M (2019) Causes of non-performing loans: the experience of gulf cooperation council countries. Entrep Sustain Issues 6(4):1955–1974

    Google Scholar 

  • Flannery MJ (1998) Using market information in prudential bank supervision: a review of the US empirical evidence. J Money, Credit Bank 30(3):273–305

    Article  Google Scholar 

  • Gaur D, Mahapatra DR (2021) The nexus of economic growth, priority sector lending and non-performing assets: case of Indian banking sector. South Asian J Bus Studies. https://doi.org/10.1108/SAJBS-01-2020-0010

    Article  Google Scholar 

  • Ge W, Drury DH, Fortin S, Liu F, Tsang D (2010) Value relevance of disclosed related party transactions. Adv Account 26(1):134–141

    Article  Google Scholar 

  • Gordon EA, Henry E, Palia D (2004) Related party transactions and corporate governance. Adv Financial Econ 9:1–27

    Article  Google Scholar 

  • Grove H, Patelli L, Victoravich LM, Xu P (2011) Corporate governance and performance in the wake of the financial crisis: evidence from US commercial banks. CorGov: Int Rev 19(5):418–436

    Google Scholar 

  • Hagendorff J, Keasey K (2012) The value of board diversity in banking: evidence from the market for corporate control. Eur J Financ 18(1):41–58

    Article  Google Scholar 

  • Iqbal J, Strobl S, Vähämaa S (2015) Corporate governance and the systemic risk of financial institutions. J Econ Bus 82(1):42–61

    Article  Google Scholar 

  • Jensen MC, Meckling WH (1976) Theory of the firm: managerial behavior, agency costs and ownership structure. J Financ Econ 3(4):305–360

    Article  Google Scholar 

  • Jian M, Wong TJ (2010) Propping through related party transactions. Rev Acc Stud 15:70–105

    Article  Google Scholar 

  • Kanagaretnam K, Lim CY, Lobo GJ (2014) Effects of international institutional factors on earnings quality of banks. J Bank Finance 39:87–106

    Article  Google Scholar 

  • Kang E, Ding DK, Charoenwong C (2010) Investor reaction to women directors. J Bus Res 63(8):888–894

    Article  Google Scholar 

  • Kaushik, K., & Kamboj, R. P. (2012). Study on the State of Corporate Governance in India. Gatekeepers of Corporate Governance—Securities and Exchange Board of India (SEBI). Indian Institute of Corporate Affairs, Thought Arbitrage Research Institute, Indian Institute of Management Calcutta, Kolkata.

  • Khanna V, Black B (2007) Can corporate governance reforms increase firm’s market values? Evidence from India. J Empir Leg Stud 4(4):749–796

    Article  Google Scholar 

  • Kohlbeck MJ, Mayhew BW (2010) Valuation of firms that disclose related party transactions. J AccPubl Policy 29(2):115–137

    Google Scholar 

  • Laeven L, Valencia F (2013) Systemic banking crises database: an update. IMF Econ Rev 61(2):225–270

    Article  Google Scholar 

  • Liang Q, Xu P, Jiraporn P (2013) Board characteristics and Chinese bank performance. J Bank Finance 37(8):2953–2968

    Article  Google Scholar 

  • Liao L, Luo L, Tang Q (2014) Gender diversity, board independence, environmental committee and greenhouse gas disclosure. Br Acc Rev 47(4):409–424

    Article  Google Scholar 

  • Millon M, John J, Tehranian H (2009) Corporate governance and earnings management at large U.S. bank holding companies. J Corp Finance 15(4):412–430

    Article  Google Scholar 

  • Mollah S, Zaman M (2015) Shari’ah supervision. corporate governance and performance: Conventional vs Islamic banks. J Bank Finance 58:418–435

    Article  Google Scholar 

  • Nguyen DD, Hagendorff J, Eshraghi A (2015) Which executive characteristics create value in banking?. Evidence from appointment announcements. Corp Gov 23(2):112–128

    Article  Google Scholar 

  • Osemeke L, Adegbite E (2016) Regulatory multiplicity and conflict: towards a combined code on corporate governance in Nigeria. J Bus Ethics 133(3):431–451

    Article  Google Scholar 

  • Palvia A, Vähämaa E, Vähämaa S (2015) Are female CEOs and chairwomen more conservative and risk averse? Evidence from the banking industry during the financial crisis. J Bus Ethics 131(3):577–594

    Article  Google Scholar 

  • Peni E, Vähämaa S (2012) Did good corporate governance improve bank performance during the financial crisis? J Financial Serv Res 41(1–2):19–35

    Article  Google Scholar 

  • Proimos A (2005) Strengthening corporate governance regulations. J Invest Compliance 6(4):75–84

    Article  Google Scholar 

  • Rakshit D, Ghosh SK (2009) Uniformity in corporate governance: miles to go. Corporate Governance: Millennium Challenges, IPE, Hyderabad, pp. 90–106.

  • Ramly Z, Chen SG, Mustapha MZ, Sapiei NS (2017) Women on boards and bank efficiency in ASEAN-5: the moderating role of the independent directors. Rev ManagSci 11:225–250

    Google Scholar 

  • Rowe W, Shi W, Wang C (2011) Board governance and performance of Chinese banks. Banks Bank Syst 1:1–40

    Google Scholar 

  • Sarkar J, Sarkar S (2009) Multiple board appointments and firm performance in emerging economies: evidence from India. Pac Basin Financ J 17(2):271–293

    Article  Google Scholar 

  • Shah, A. (2020) It’s the incentives, stupid. The Business Standard, p 9

  • Shkodra J, Ismajli H (2017) Determinants of the credit risk in developing countries: a case of Kosovo banking sector. Banks Bank Syst 12(4):90–97

    Article  Google Scholar 

  • State Bank of India Annual Report, 2018–19, p. 145 https://www.sbi.co.in/corporate/AR1819/pdf/english/Financial.pdf. Accessed on 19 Jan 2021

  • Swartz M, Watkins S (2003) Power failure, the insider story of the collapse of Enron. Doubleday, New York

    Google Scholar 

  • Tang X, Du J, Hou Q (2013) The effectiveness of the mandatory disclosure of independent directors’ opinions: Empirical evidence from China. J Account Public Policy 32(3):89–125

    Article  Google Scholar 

  • Tanna S, Pasiouras F, Nnadi M (2011) The effect of board size and composition on the efficiency of UK banks. Int J Econ Bus 18(3):441–462

    Article  Google Scholar 

  • Umar M, Sun G (2018) Determinants of non-performing loans in Chinese banks. J Asia Bus Studies 12(3):273–289

    Article  Google Scholar 

  • Upadhyay A, Sriram R (2011) Board size, corporate information environment and cost of capital. J Bus Finance Acc 38(9–10):1238–1261

    Article  Google Scholar 

  • Vallascas F, Mollah S, Keasey K (2017) Does the impact of board independence on large bank risks change after the global financial crisis? J Corp Finan 44:149–166

    Article  Google Scholar 

  • Walker, D. (2009). A review of corporate governance in UK banks and other financial industry entities. Consultative Document, November

  • Wang T, Hsu C (2013) Board composition and operational risk events of financial institutions. J Bank Finance 37(6):2042–2051

    Article  Google Scholar 

  • YES Bank Annual Report, 2018–19, p. 5. https://www.yesbank.in/pdf/annualreport_2018_19_pdf. Accessed on 19 Jan 2021

  • Zagorchev A, Gao L (2015) Corporate governance and performance of financial institutions. J Econ Bus 82:17–41

    Article  Google Scholar 

  • Zinkin J (2011) Challenges in implementing corporate governance: Whose business is it anyway? Wiley, Singapore

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Commerce, Tripura University, West Tripura, Tripura, 799022, India

    Rajat Deb

Authors
  1. Rajat Deb
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Rajat Deb.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Deb, R. YES Bank fiasco: a corporate governance failure. Decision 48, 181–190 (2021). https://doi.org/10.1007/s40622-021-00277-7

Download citation

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s40622-021-00277-7

Keywords

Search

Navigation