**1. Introduction**

During the peak of the global financial crisis of 2008, the major failures that have been involved in the banking crisis were particularly remuneration, as executive incentives, risk management, shareholder activism, and the problems of qualification of the board. Indeed, an excess of credit combined with poor governance in the banking industry can generate carrier failures of a systematic risk. At this point, the term governance has drawn the attention of lawyers and economics experts, political scientists, sociologists, and management scientists [1]. Also, poor banking governance was a major cause of global crisis [2].

Bernanke [3] showed that the financial crisis of 2007/2008 has been started for many reasons (insufficient information, fraud, and incompetence).

Kirkpatrick [4] suggests that the systematic crisis, due to the failure of the international financial market, was also a crisis of corporate governance and regulations. Before and during the financial crisis, corporate governance issues have been attracted attention, since it led to the collapse of many financial institutions in the OECD report. Kirkpatrick [4] showed that the "financial crisis can be to an important extent attributed to failures and weakness of corporate governance arrangements. When they were put to the test, corporate governance routines did not serve the purpose to safeguard against excessive risk-taking in some financial service companies."

Furthermore, the subprime crisis started in the second half of 2006 with the crash of mortgage loans (mortgages) at risk in the United States (the subprime), which borrowers, often of a modest condition, were no longer able to repay. Revealed in February 2007 by the announcement of significant provisions passed by the HSBC bank, it turned into an open crisis when the periodic auctions did not find buyers in July 2007. Given the current accounting rules, it is impossible to give a value to these securities, which had to be provisioned at a value close to zero.

Second, the legal context is also unique: France is based on civil law, with little protection for minority shareholders, a weak market for corporate control and very

Walker's review [11] showed that the moral failure and inadequacy of corporate governance mechanisms in the global financial system contribute to the financial

In this vein, Minton [12], Lemmon and Lins [13], and Baek et al. [14] found that

Burcu et al. [18] showed that the interaction of ownership structures and stock prices differ from period to period. They indicated the positive relation between inside ownership structure and stock price in the periods January 2008 and March 2009; a negative relationship is observed during the periods between October 2008 and January 2009. The strong negative relation is monitored between largest own-

Steven [19] uses a variety of econometric models, including feedback, to test the robustness of (dynamic panel estimations) and to examine the relationship between the board's characteristics and foreign ownership. They showed that the outside

Karolyi et al. [20] indicated that the yen/dollar foreign exchange rates, the treasury bill returns, and the industry impacts have no measurable effect on the US and Japanese return correlations. Moreover, Antoniou et al. [21, 22] found that futures' trading has a significant impact on co-movements across the markets. Borokhovich et al. [23] found that there is a positive nexus between the monitoring

Board sizes are responsible for the identification, assessment, and management

of all types of risk, including operational risk, market risk, and liquidity risk (FRC2010b). The debate regarding this relationship, which has long been ignored as an important element in the process of development of the stock markets, minimizes the risk of investor. In this context, Minton et al. [12] found that the board size negatively affects the market risk. Similarly, in a recent study, Kryvko et al. [24] have examined the European banks and also found a negative relationship

a certain degree of corporate governance is effective regarding the stock price reduction in the event of a financial crisis. However, risk is another important factor on which investors base their investment. Therefore, Huson et al. and Choi et al. [15, 16] stated that higher ratio of independent directors is expected to have a positive effect on corporate performance. Huang et al. [17] believe that the independent board can help reduce the stock market volatility. They divide the sample into two groups regarding whether the firm appoints independent directors and

investigate the effect of independent directors on stock price volatility.

directors have important role in the stabilized stock price volatility.

of outside directors and the firm's use of the interest rate derivatives.

ership, concentrated ownership, and stock prices.

**2.2 Risk management and the financial crisis**

**2.3 Risk management, corporate governance**

between the board size and the risk of the company.

**2.1 Does corporate governance "cause" the financial crisis**

few hostile takeovers [10].

*The Primary Origin of the Financial Crisis DOI: http://dx.doi.org/10.5772/intechopen.86173*

**2. Literature review**

crises.

**15**

Besides, policy makers have realized the extent and nature of this crisis belatedly, during the collapse of the prices of the various assets. The recent "subprime" crisis revealed some shortcomings in corporate governance and risk management. It also revealed failures of risk management throughout the business world. Since corporate governance is designed to reduce the information asymmetry and control of opportunism management, which is considered as a factor, this contributed to the recent crisis [5, 6]. The latter is crucial for both the developed and developing countries. The organization of power in the company is considered an important factor in the stability of capital markets and investment dynamics.

In fact, risk management is widespread as a mode of governance and management control, although financial crisis has clearly shown its shortcomings. Based on the existing literature on risk management, we will argue that the global financial crisis provides ample opportunity to understand the rhetorical tactics informing about the discourse of risk management. Our research is based on a scientific debate about the relationship between risk management and corporate governance. Several studies showed that corporate governance failure and risk management are the primary causes of the 2008–2009 crisis. Inadequate risk management and inappropriate remuneration practices in the financial sector are placed squarely in the center of the financial crisis. Risk management presents the most important factor in the context of a set of practices and corporate governance structures. While most studies indicate that the weakness o corporate governance and inadequate risk management leads to the financial crisis, in particular, where there is insufficient risk oversight by the board of directors. For example, Working Group on Financial Regulation (2008)<sup>1</sup> mention in March just before the Bear Stearns collapse, "risk management feebleness at some large US and European financial institutions" as one of "the primary underlying causes of the turmoil in the financial markets." That report complains about "regulatory policies, including capital and disclosure requirements that failed to mitigate risk management weaknesses." They showed that the weak risk management in some major US and European financial institutions was the main causes of the global financial crisis. Other investigations indicate that the defeat in corporate governance is a major factor in the financial crisis.

In this chapter, we focus on the French market and bring new light in various regards.

First, France is based on concentration ownership, marked by family stockholders, even big, public companies [7]. In this area, Faccio and Lang [8] indicate that less than 14% of French companies are multi-participation, against to 37% in Europe in general; furthermore, 64.82% of French companies are controlled by a single family, compared to 44.29% in Europe. Also, Johnson et al. [9], France is different to other European countries, in the financial systems, since it comprises two systems, which are the following ones: "the central family" and the "based on the bank," although the first prevails.

<sup>1</sup> See The President's Working Group on Financial Markets, "Policy Statement on Financial Markets," March 2008, https://ecgi.global/sites/default/files/working\_papers/documents/SSRN-id1448118.pdf

Second, the legal context is also unique: France is based on civil law, with little protection for minority shareholders, a weak market for corporate control and very few hostile takeovers [10].
