The impacts of corporate governance on bank risk taking: an international analysis

• Main Authors: Kuan-Ting,Lin, 林冠廷
• Other Authors: Hsiao-Jung,Chen
• Format: Others
• Language: zh-TW
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/51865078218070971255

碩士 === 南台科技大學 === 財務金融系 === 101 === For a bank, different risks are inter-related to each other. A corporate governance structure would affect a bank’s decision and its risk taking when the bank manager faces a variety of risks. Even the decision could improve or worsen the financial crisis. Because lack of the research relevant to this issue, this paper discusses the influence of a bank’s corporate governance structure on its risk taking by using seemingly unrelated regression model. It specifically emphasizes on the choice of credit risks, liquidity risks and interest rate risks under maturity transformation business model. The sample consists of the financial institutions in G20 and Taiwan over the period 2002-2011. The credit risk and liquidity risk are measured by a bank’s non performing loans ratio (NPL ratio) and liquidity creation respectively. The interest rate risk is measured using the interest rate margin between interest income from loans and interest expenses on deposits, standardized by total operating income. We choose the independent index, ownership level, and the board size to judge a bank’s governance structure is controlled by shareholders or is controlled by managers. In addition, this paper also controls the supervisory variables and the identity of a bank’s manager and controlling shareholder to investigate their influence on the bank risk taking. The results show that credit risk, interest rate risk, and liquidity risk are affected by one-period-lag data of itself. A bank controlled by shareholders operates sound but has not emphasized on controlling of liquidity risks. The bigger the board size, the more the liquidity rate risk. The situation that a bank manager is also the director is not good for the operation of a bank. A bank would be more efficient and take less risk as a controlling shareholder is a business company. If the bank has more capital, it will reduce liquidity creation and lower liquidity risk, confirming the “financial fragility-crowding out” hypothesis. As a bank takes more credit risks or liquidity risks, it would increase the correlation of other two risks and make against risk diversification. Therefore, credit risk and liquidity risks are important. Controlling of corruption can effectively reduce interest rate risk and liquidity risk, but increasing credit risk and liquidity risk when the system of deposit insurance is exercised. This implies that moral hazard exists. Although higher investor’s protection could supervise the loan quality, the bank still maintains profit by increasing the volume effects.