Strategy & Organization Area Recruiting Candidate
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Desautels Faculty of Management
Strategy & Organization Area
presents recruiting candidate:
Lori Yue
Columbia University
Tuesday, December 8, 2009
10:00AM - 11:30AM
Room: Bronfman 620
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ABSTRACT
Self-governance among commercial banks in Manhattan, 1840-1980
I study the conditions for the effectiveness of industry self-governance in solving the problem of the commons and thus affecting the survival chances of organizations. I find that the New York Clearing House Association (NYCHA), a self-governing institution among banks, was successful in imposing self-regulation and organizing cooperative arrangements before the inception of government regulation systems. Using the population of commercial banks in Manhattan from 1840 to 1980, I find that banks that participated in the NYCHA had a significantly lower failure rate. I argue that the effectiveness of the self-governance hinged on its nature as a city-based coalition that included a relatively small number of densely-connected banks. Especially, elite bankers鈥� affiliations with elite clubs in New York constituted a network that enabled the function of self-governance. In support of the argument, I find that the density of elite bankers鈥� network had significant moderating effects on the effectiveness of the NYCHA in reducing member banks鈥� failure rates and their operational risks. This self-governance lost its efficacy after the government actively intervened with the governance of banking. But the government鈥檚 safety-nets introduced a moral hazard problem, in that banks that participated in government institutions tended to be more risk-taking. I discuss contributions of this paper to a synthesis of institutional, community, and ecological perspectives, and the implications for banking regulation.