Do board compositions and ownership structures affect lending and risk-taking at banks? : empirical studies of Japan-listed banks

• Main Author: Mak, Ka Wai
• Published: SOAS, University of London 2018
• Online Access: https://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.766690

This thesis empirically investigates whether corporate governance has effects on lending and risk-taking at Japan-listed banks. The conventional views are that (i) board compositions and ownership structures affect lending behaviours at banks, and (ii) corporate governance measures are very often ineffective at safeguarding against excessive risk-taking by banks. The purpose of this thesis is to provide empirical analyses on the effects of corporate governance measures, such as board compositions and ownership structures, on lending and risk-taking at Japan-listed banks between 2005 and 2013. To this end, this thesis contains four sub-topics. First, it examines whether levels of external directors, external director tenures, internal and external director share ownerships, board expertise, and board homogeneity have an impact on bank lending and risk-taking. Second, it examines whether bank ownership structures impact lending and risk-taking behaviours. The assessments focus on shareholders which are domestic and foreign financial institutions, domestic and foreign non-financial companies, and domestic and foreign governmental institutions. Third, it investigates whether bank boards serve as substitution or complementary monitors for shareholders and regulators. Lastly, it examines whether shareholder supremacy corporate governance measures weaken or strengthen the internal and external governance of banks. To investigate these issues, this thesis uses two regression models: fixed-effects, and generalised method of moments Arellano Bond estimations. The empirical findings indicate that (i) external directors increase risk-taking, but decrease levels of impaired loans, (ii) foreign financial institutional shareholders are likely to induce risktaking at banks, (iii) a positive relationship exisits between domestic government share ownerships and risk-taking of Japan-listed banks, (iv) internal directors and regulators complementarily monitor banks, (v) institutional shareholders of Japan-listed banks are likely to play active roles in monitoring risk-taking, and (vi) a corporate governance approach to shareholder supremacy increases risk-taking at banks.