A Study of the Effect of Independent Directors’ Characteristics and Banks’ Characteristics on Banks’ Risks

• Main Authors: Wu, Pei-Wen, 吳佩紋
• Other Authors: Horng,Yuh-Sheng
• Format: Others
• Language: en_US
• Published: 2018
• Online Access: http://ndltd.ncl.edu.tw/handle/83t4t4

碩士 === 靜宜大學 === 財務金融學系 === 106 === This paper examines that effect of independent directors’ characteristics and banks’ characteristics on banks’ risk. We use a sample of 38 commercial banks in Taiwan from 2002 to 2016. In recent year, the issue of risk management becomes a more and more important component of corporate governance after the occurrence of the Enron scandal, the passage of Sarbanes Oxley Act and the subsequent of financial regulatory reform (Lusting, 2003). Previous literature (Pathan, 2009; Wang et al., 2013) found that if a bank increases its independent directors, the monitor of a bank can be enhanced, and its risk may be reduced. Although the law requires the public listed companies need to have independent directors, however, in recent year, there have been many financial incidents lead to the suffering crisis of bank, making us ponder the problem of independent director's quality. Some papers Alvarado and Bravo, 2017; Vallascas et at., (2017), Liang et al. (2013), Berger et al. (2014) has documented the relationship between independent directors’ characteristics and bank risk without considering banks’ characteristics. Therefore, we like to have an investigation is not only the relationship between a bank's independent directors' characteristics and its bank risk but also the relationship between the characteristics of banks and bank risk in this study. Our findings are as follows: 1. The number of independent directors, education, tenure and gender are significantly negatively related to bank risk; however, finance, accounting, the number of directorships, and the number of the meeting is significantly positively related to bank risk. 2. Bank holding companies and government-owned banks are significantly negatively related to bank risk; however, bank size and board size are significantly positively related to bank risk. 3. Pre-crisis, independent directors' with professional experience and long-tenured independent directors are positively related to bank risk, however, post-crisis due to the improvement of governance environment and the strengthening of regulations, making independent directors more effective to supervise and reduce bank risk. 4. Both pre-crisis and post-crisis, the bank holding companies and government-owned banks are significantly negatively related to bank risk. Finally, we employ credit risk and market risk for robustness check. The results remain consistent.