Anastasia Tserkovnyuk

171 Pages·2014·0.98 MB·English

Corporate Governance in the Ukrainian Banking Sector

DISSERTATION
of the University of St. Gallen
School of Management,
Economics, Law, Social Sciences
and International Affairs
to obtain the title of
Doctor of Philosophy in Management

submitted by
Anastasia Tserkovnyuk
from
Austria

Approved on the application of

Prof. Dr. Ulrich Schmid
and
Prof. Dr. Martin Hilb

Dissertation no. 4379
The University of St. Gallen, School of Management, Economics, Law, Social
Sciences and International Affairs hereby consents to the printing of the present
dissertation, without hereby expressing any opinion on the views herein expressed.

St. Gallen, October 22, 2014

The President:

Prof. Dr. Thomas Bieger

II
ACKNOWLEDGMENTS
First and foremost I would like to thank my advisors, Ulrich Schmid and Martin Hilb,
for supporting me during the last few years. Their guidance helped me through the
time of research and writing this thesis. I am thankful for their motivation, patience,
constructive criticism and friendly advice during the project work.
The PhD journey, was a long journey, with a lot of up’s and downs, therefore, I would
like to express my gratitude to my friends who accompanied me through this chapter
of my life. Selina Gartler, Hannes Tschütscher, Teresa Schoch, Carla Bayer, Birgit
Fischer, Agnes Sprenger and Sonja Näscher - thank you for your support, your humor
and your friendship. I am especially grateful to Agnes Sprenger for proofreading the
manuscript.
Last but not least, I would like to thank my wonderful parents Elena Romanova and
Yuriy Tserkovnyuk for their unconditional love and encouragement during my whole
life. From the bottom of my heart, I would like thank my boyfriend Franz Steinberger
who was supporting me during the final stages of this PhD.

III
IV
CONTENTS
Contents ......................................................................................................................... V
List of Figures ............................................................................................................... IX
List of Tables ................................................................................................................. X
List of Abbreviations .................................................................................................... XI
Acknowledgments1. .......................................................................................................................... 1

1. INTRODUCTION ........................................................................................................ 1
1.1. Research Objectives .............................................................................................. 6
1.2. Definition of Key Terms ....................................................................................... 7
1.2.1. Corporate Governance ....................................................................................... 7
1.2.2. Banks ................................................................................................................. 9
1.2.3. The link between corporate governance and banks ........................................ 11
1.2.4. The link between corporate governance and transition economies ................ 12
1.3. Structure of the Study ......................................................................................... 15

2. RESEARCH DESIGN AND METHODS ...................................................................... 17
2.1. Research Design and Setting .............................................................................. 17
2.2. Sample ................................................................................................................ 17
2.3. Data Collection ................................................................................................... 18
2.4. Data Analysis Methods ....................................................................................... 21
2.5. External and Internal Validity ............................................................................ 22

V
3. ANALYSIS OF UKRAINIAN CORPORATE GOVERNANCE
ENVIRONMENT ......................................................................................................... 23
3.1. Corporate Governance theories .......................................................................... 23
3.2. Corporate Governance Framework..................................................................... 27
3.3. Empirical analysis ............................................................................................... 31
3.3.1. Economic influences ....................................................................................... 31
3.3.1.1. Stage of transition ........................................................................................ 31
3.3.1.2. State of the economy .................................................................................... 34
3.3.1.3. Capital markets ............................................................................................ 37
3.3.1.4. Stock exchanges ........................................................................................... 39
3.3.1.5. Banking sector ............................................................................................. 42
3.3.1.6. Ukrainian regions ......................................................................................... 48
3.3.1.7. Education platforms ..................................................................................... 51
3.3.1.8. Economic implications for corporate governance ....................................... 53
3.3.2. Legal/political influences ................................................................................ 54
3.3.3. Social / cultural influences .............................................................................. 57
3.3.3.1. Cultural traditions ........................................................................................ 57
3.3.3.2. Ethical values ............................................................................................... 60
3.3.3.3. Institutions .................................................................................................... 61
3.3.3.4. The social/cultural environment’s implications for corporate governance . 63
3.3.4. Technological influences ................................................................................. 64
3.3.4.1. Transparency ................................................................................................ 64
3.3.4.2. Risk management ......................................................................................... 65
3.3.4.3. Technological environment’s implications for corporate governance ........ 66
3.4. Corporate Governance Environment conclusion ................................................ 67

VI
4. HOW DO BANK BOARDS REALLY WORK IN UKRAINE? ........................ 71
4.1. Hilb’s Integrated Corporate Governance Framework ........................................ 71
4.1.1. Board of Directors ........................................................................................... 73
4.1.2. The Board Structure ........................................................................................ 73
4.1.3. The Board Culture ........................................................................................... 79
4.1.4. Integrated Board Management ........................................................................ 81
4.2. Empirical Analysis .............................................................................................. 84
4.2.1. Board of Directors ........................................................................................... 84
4.2.2. The Board Structure ........................................................................................ 86
4.2.3. The Board culture ............................................................................................ 96
4.2.4. Integrated Board Management ...................................................................... 100
4.3. Conclusion ........................................................................................................ 104

5. DOES TRUST REALLY MATTER? .................................................................. 109
5.1. Trust Theory Overview ..................................................................................... 110
5.2. Empirical results ............................................................................................... 117
5.3. Conclusion ........................................................................................................ 127

VII
6. CONCLUSION .................................................................................................... 129
6.1. Current Corporate Governance and Future Challenges .................................... 129
6.2. The Ukrainian supervisory boards .................................................................... 130
6.3. Trust .................................................................................................................. 132
6.4. Limitations of the Research .............................................................................. 133
6.5. Suggestions for Future Research ...................................................................... 134

Appendices .................................................................................................................. 135
REFERENCES ........................................................................................................... 141
Note on the Author ...................................................................................................... 159

VIII
LIST OF FIGURES
Figure 1: An overview of the financial system ............................................................. 10
Figure 2: Corporate Governance framework ............................................................... 27

IX
LIST OF TABLES
Table 1: Population of the Research 1 ......................................................................... 19
Table 2: Population of the Research 2 ......................................................................... 21
Table 3: Overview of theories affecting corporate governance development .............. 23
Table 4: Benefits of Corporate Governance ................................................................. 25
Table 5: Effects of environmental variables on Stakeholder groups, and implications
for theory ....................................................................................................................... 28
Table 6: Main macroeconomic indicators .................................................................... 35
Table 7: Bank indicators ............................................................................................... 44
Table 8: Concentration in the Ukrainian banking sector ............................................. 45
Table 9: Top-15 Ukrainian banks ................................................................................. 46
Table 10: IFC survey banks distribution ...................................................................... 50
Table 11: Key laws and regulations addressing corporate governance ...................... 54
Table 12: Differences between traditional and new corporate governance ................ 72
Table 13: Board cooperation rules ............................................................................... 80
Table 14: Contrasting requirements of board members ............................................... 81
Table 15: Common definitions of trust ....................................................................... 111

X