A Contingent Claim Valuation of Board Monitoring and Bank Default Risk under Sunflower Management: A Numerical Analysis

• Main Authors: Si-Yu Lai, 賴思宇
• Other Authors: Jyh-Horng Lin
• Format: Others
• Language: zh-TW
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/x4u5ca

碩士 === 淡江大學 === 國際企業學系碩士班 === 102 === Sunflower management describes a style of management adopted by chief financial officer in CFO an attempt to produce a consensus between his own view and the view that he ascribes to the board. On the other hand, CFO’s decision making always match the board expectations for high equity return and low default risk. In this moment, the board’s utility is the same as the CFO’s utility. This thesis we construct the bank’s objective function by assuming the bank maximizes its return of equity capital, We use a contingent claim approach based on the option-based Black-Scholes valuation and implied be Merton (1974) model. Our mode involves the firm theories so we use the Sealey (1980) model. Finally we use Vassalou and Xing (2004) to evaluate the default risk probability that sows the important of controlling the default risk probability by bank. This thesis shows that when CFO adopted sunflower management to operate the bank, the board do not bother CFO will make more trust of each other. In terms of making decision, that is more easier to produce a consensus between his own view and the view that he ascribes to the board. The disadvantage is that both of their preference is meeting of minds, so that will make CFO disregards the information conveyed by the signals.