Home About IUP Magazines Journals Books Amicus Archives
     
A Guided Tour | Recommend | Links | Subscriber Services | Feedback | Subscribe Online
 
The IUP Journal of Corporate Governance :
Banking Sector Governance: Lessons from Hong Kong Listed Banks— A Three-Year Perspective
:
:
:
:
:
:
:
:
:
 
 
 
 
 
 
 

Hong Kong's financial sector is popular within the banking industry for the range of services it provides and the service providers themselves. Using the case study approach, this paper explores the changes to the Boards of Directors and governance issues of the 12 listed banks on the Hong Kong Stock Exchange over a three-year period. It focuses on issues such as the number of directors on the boards, their qualifications, type of directors in terms of independence, outside directorships held, and the auditors of the financial statements from 2004 to 2006. Through the use of archival data over a three-year period, this paper finds that the overall listed banks in Hong Kong exhibit good corporate governance, and that this governance has in fact improved in quality over the years. The three-year comparison demonstrates that the high level of corporate governance exhibited by the 12 listed banks in Hong Kong from 2004 to 2006 provides a possible explanation to the success of the region as a significant international financial center due to the factors such as absence of duality of CEO and chairman, use of the Big Four audit firms, qualifications of directors, and use of independent non-executive directors on the boards.

Hong Kong is an important international financial center, and one way in which it can maintain an orderly commercial environment is through corporate governance. In view of the special roles that banks play in economies, it is especially prudent that listed banks demonstrate good corporate governance to enhance the business setting. This paper explores the current corporate governance initiatives in the backdrop of the Stock Exchange of Hong Kong (2004), over a three-year period, i.e., 2004 - when the code was just a draft; 2005 - when it became law in 2005; and 2006 - the first year of its implementation.

The Hong Kong Monetary authority as of February 2006, reported that there were 137 Licensed Banks, 30 Restricted Licensed Banks, 32 Deposit-Taking companies and 85 Representative Offices of Foreign Banks. For the quarter ended September 2006, banks employed 81,619 persons in Hong Kong.The Hong Kong Trade Development Council (HKTDC, 2007) reported that 76 of the world banks exists in Hong Kong and that it is the second largest loan syndication center in Asia and Asia's third largest international banking sector. Hong Kong is now the sixth largest foreign exchange center, and is known for its `high standards of market transparency, disclosure and prudently supervised financial institutions' (HKTDC 2007, p. 1). These statistics confirm the importance of Hong Kong as a financial center and the importance of its banking industry.

 
 
 

Banking Sector Governance, financial sectors, Hong Kong Stock Exchange, financial statements, commercial environment, corporate governance, international banking sector, Health International Holidays Insurance Ltd, Organisation of Economic Cooperation and Development, audit committee independence.