City Commercial Bank Chairman’s Experiences Characteristics,Corporate Governance And Bank Risk-taking

The occurrence of the financial crisis has caused various circles to think about the causes of the crisis.In addition to the macro-economic development status,monetary policy,and industry competition,research perspectives have turned to micro-level factors of bank internal governance,such as executive characteristics,corporate governance and operating characteristics of banks.In the context of economic globalization,China is occupying an increasingly important position in the world economic system.With the continuous improvement of the degree of openness of China’s financial market and the level of marketization of interest rates,the external environment and internal governance China’s financial industry facing are full of uncertainty.At present,the Chinese financial industry is in the process of factors marketization,diversification of financial entities,and rapid iteration of financial products.With the promotion of interconnection and information technology,the traditional framework system of the financial industry is experiencing profound changes,and new financial forms have begun to appear.China’s financial market started later than western countries,and the financial system is still imperfect.As the main pillar of China’s financial system,banks undertake important tasks in keeping the stability of financial market.The outbreak of the financial crisis in 2008 was due to the accumulation of risks caused by the poor management of individual financial institutions.The occurrence of the crisis made people realize that the financial crisis is not a large-scale crisis event in the financial system.The accumulation of risks within individual financial institution will also cause the global financial turmoil,it also aroused the concern of academic fields and practitioners on the risk of individual financial institutions,especially bank risk.Therefore,the research perspective of financial risk has shifted into the interior of individual financial institution commercial banks.The factors affecting bank risk commitment have also shifted from external factors to internal factors.In recent years,there are frequent violations of bank executives.Many scholars have analyzed the impact of executive background characteristics on bank operations from different perspectives.However,the research conclusions are inconsistent.Some studies have conducted in-depth and detailed discussions on the characteristics of bank executives’ experience.At the same time,with the widespread application and continuous improvement of modern corporate governance mechanisms,commercial banks are also continuously improving their internal governance mechanisms to improve governance effectiveness.Therefore,analyzing the bank’s risk management status from the background characteristics of the bank’s senior management can clarify the mechanism by which the characteristics of the senior managers’ experiences have an impact on bank risk-taking,and seek a path to find the important role of the bank’s core human capital.In addition,the establishment of modern governance mechanism for individual commercial banks can promote better planning and improve internal governance of the bank.It is of great significance to strengthen the bank’s internal risk management and prevent the occurrence of crisis events and systemic risk spillovers.At present,detailed analysis and empirical tests of the external factors that cause financial risks are conducted at home and abroad,and they are discussed from the perspective of external macro-economic environment,industry development environment and internal micro environment,among which the macro-economic environment and industry development are the external factors,while the internal factors affecting bank risk are not fully analyzed.Among the internal factors influencing bank risk commitment,there are also many scholars who have studied the individual factors of banks at the micro level.Most of the research content has focused on the governance mechanism and internal control systems.Few scholars have studied subjective initiative from microscopic individuals with detailed analysis and exploration from the perspective of bank top managers.For commercial banks,in addition to the relationship between the macro environment and external policies,the business strategies and plans formulated are also closely related to the psychological characteristics and risk appetite of the top managers.According to the Upper Echelon Theory,the background characteristics of executives are important factors that affect bank risk-taking,and past experience is an important factor that affects the psychology and behavior of executives.For a commercial bank,chairman of the board has a high authority in bank operations and decision-making.Therefore,this paper selects the chairman of Chinese city commercial banks as the research sample based on the Upper Echelon Theory,and analyzes the influence of chairman’s political experience,diversified experiences and tenure of appointment on bank risk taking.Analyze the different impact of the chairman’s experiences characteristics on bank risk taking.In a theoretical sense,on the one hand,it can supplement the inadequacy of current research on the background characteristics of top managers,extend into the chairman’s experiences characteristics from different perspectives,and propose from the perspective of experience characteristics.We formed a theoretical path that chairman experiences have an impact on bank risk taking,and conducted an empirical test based on data of Chinese city commercial banks.The research conclusions have enriched the theoretical framework of background characteristics of executives.On the other hand,the researches on the influencing factors of bank risk exposure has been expanded.An executive perspective with subjective initiative,analyzes the impact of the characteristics of the chairman’s experiences on the bank risk exposure,and considers other personal characteristics of the chairman,bank corporate governance characteristics and operating characteristics,etc.The regulatory role has enriched the influencing factors of bank internal governance.In a practical sense,commercial banks are the pillar industry of China’s financial system.In recent years,although the overall asset scale of city commercial banks in China has been increasing rapidly,however,the occurrence of violations by some city commercial bank chairmen has shifted the perspective of bank risk research to senior managers of banks.The research conclusions on the background characteristics of the chairman not only help the bank to select suitable executives based on its corporate governance characteristics and operating characteristics,establish a reasonable human capital structure,and promote human capital and other resources to play a more effective governance role in bank value creation and risk reduction;it can also help banks standardize and improve internal governance,formulate reasonable governance mechanisms and business strategies,improve executive incentive policies,internal supervision and management mechanisms,and enhance the bank stability and level of risk resistance.Based on the theories such as the Upper Echelon Theory,Human Capital Theory,Information Asymmetry Theory,Principal-Agent Theory,and Incentive Theory,it is known that the background characteristics of executives are important factors affecting bank risk exposure.The academic circles have discussed relevant characteristics of senior executives such as age,gender,education,professional background,etc.,and the research on the characteristics of senior executives has mostly focused on the research of certain types of characteristics,such as academic experience,overseas experience,finance experience,etc.,not enough studies fully researched the characteristics of senior management experiences,and lacked comprehensive research on senior management experience,such as the study from single experience to diversified experience.Based on this,this paper starts from the political experience of the chairman of the bank and analyzes the influence of the chairman’s political experience,tenure characteristics,and diversified characteristics on bank risk exposure.Based on the fact that the operation of Chinese commercial banks is different from that of western countries,in the West,the CEO of a bank is usually the highest decision maker.But in the operation of a commercial bank in China,the chairman of the bank has high authority in the operation decision making,chairman occupies a dominant position.Therefore,this paper selects the chairman of the city commercial bank in China as research sample of the background characteristics of senior managers,and based on the individual characteristics,experience characteristics,corporate governance data on operating characteristics,as well as data of China’s macroeconomic conditions,monetary policy,and regional financial environment,this paper empirically tested the influences of the chairman’s political experience characteristics,diversified experience characteristics,tenure,and corporate governance characteristics on bank risk exposure.On this basis,it also explores the theoretical path of other individual characteristics of the chairman(gender,age,education,tenure,financial supervision experience,etc.),bank corporate governance characteristics(size of board of directors,independent director ratio,equity structure,etc.)and business management features(cross-regional operations,capital adequacy ratios etc.)that affect bank risk exposure.The specific research contents and conclusions of this article are as follows:First,based on the related theories of Upper Echelon Theory,Human Capital Theory,Information Asymmetry Theory,Principal-Agent Theory,and Incentive Theory,this paper analyzes the theoretical path of the chairman’s experience characteristics affecting bank risk exposure,and expounds the role of the chairman as bank human capital is an important resource that plays an important role in the operation and management of the bank.At the same time,based on the background of the chairman,it analyzes how the bank chairman with different background characteristics has an impact on the risk exposure of the bank.Theoretically expounded the principle that the chairman’s gender,age,education,and political experience have an impact on bank risk-taking,and analyzed the possible impacts of board characteristics,equity structure,and executive incentive characteristics on bank risk-taking in corporate governance.In terms of specific research content,the bank’s risk exposure will be increased based on the chairman’s political experience.The chairman’s tenure and bank risk exposure have a non-linear U-shaped relationship,and the relationship between the expected tenure and bank risk exposure varies depending on the composition of the expected tenure.The expected tenure of the position is positively related to bank risk-taking,and the expected tenure of age has an inverted U-shaped relationship with bank risk-taking.The chairman’s experiences diversification will also increase the bank’s risk-taking level.Second,a systematic analysis of the influence of the chairman’s political experience in the background characteristics of senior executives on the bank’s risk exposure.City commercial banks in China were created by local governments to promote regional economic development and provide funds for local enterprises.As a major shareholder,the city commercial bank itself has strong political attributes,and the chairman of the city commercial bank is mostly appointed by the local government.His professional background often includes political experience.The chairman’s government work experience usually has a certain impact on bank operations.Political resources help banks to obtain more credit customers,and it is also prone to risk dependence on the government.Therefore,this article proposes that the chairman of a bank with political experience can increase the risk taking level of the bank,and is based on the cities in China from 2007 to 2017 of the relevant data such as the background and operating characteristics of the chairmen of the city commercial banks test the relationship between the chairman’s political experience and bank risk-taking,and discuss the moderating factors that affect the relationship between the chairman’s political experience and bank risk-taking.The empirical results show that: first,the chairman’s political experience can significantly increase bank risk exposure;second,the individual characteristics of the chairman’s age,gender,and education have an impact on the relationship between the chairman’s political experience and bank risk exposure;again,the bank’s corporate governance characteristics such as the size and independence of the board of directors,and equity structure can also negatively regulate the relationship between the chairman’s political experience and the bank’s risk-taking;finally,the bank’s cross-regional operation and other own operating characteristics can also inhibit the influence of chairman’s political experience on bank risk-taking.Thirdly,the mechanism of the chairman’s experiences diversification characteristics on bank risk taking is analyzed.For the study of the chairman’s single experience,there have been many research results,while the academic field lacks research on the chairman’s overall career experiences.Will the chairman of a bank with diversified career experiences increase bank risk exposure? Based on this basic research question,the fifth chapter of this paper measures the diversified characteristics of the chairman’s experiences from the three dimensions of cross-industry,cross-regional and cross-enterprise experiences,and analyzes the principle of the impact of diversification on bank risk commitment.An empirical test was conducted based on the data of the chairman and diversified characteristics of the city commercial banks in China.The empirical results show that the chairman’s experiences diversification can also significantly increase bank risk bearing;the existing tenure,financial supervision experience and age can negatively regulate the relationship between the chairman’s experiences diversification and bank risk bearing;the board of directors such as scale,independence,cross-regional operations,and core capital adequacy can also significantly affect the relationship between the chairman’s experiences diversification and bank risk-taking.The research on the diversification of the chairman’s experiences complements the current research on the background characteristics of bank chairman,and enriches the research content of the factors affecting bank risk-taking.Fourth,from a theoretical perspective,the possible impact of the tenure of the chairman on the bank’s risk exposure is discussed,and the relationship between the tenure of the chairman of the board and the risk exposure of the bank is tested based on the data of the tenure of the chairmen of the city commercial banks in China.Divided into existing tenure and expected tenure.The existing and expected tenure can reflect the responsibility for management functions,accumulated experience,and increased access to information.Therefore,it will affect bank risk management.The expected term is composed of the expected term of position and age.In addition to analyzing the impact of existing tenure on bank risk exposure,this article also analyzes the impact of the chairman’s expected tenure on bank risk exposure from two different perspectives.The empirical results show that: first,there is a difference in the impact of the chairman’s existing and expected tenure on bank risk exposure;there is a non-linear Ushaped relationship between the existing tenure and bank risk exposure;second,the expected tenure of chairman position and bank risk exposure have a significant positive correlation,and there is a significant inverted U-shaped relationship between the expected tenure of age and bank risk exposure.Finally,the relationship between the chairman’s tenure and bank risk exposure will be affected by factors such as the age of the chairman and the characteristics of the board of directors.Specifically,age can adjust the relationship between the chairman’s existing term and bank risk exposure.Within a certain scope,elder age can significantly increase the impact of the chairman’s tenure on bank risk exposure.Beyond the certain scope,the age increasing of the chairman will negatively regulate the relationship between the chairman’s tenure and bank risk exposure.In addition,the size of the board of directors can also affect the relationship between the expected term of the chairman’s post and bank risk exposure.The size of the board can negatively affect the relationship between the expected term of the post and bank risk exposure.Moreover,equity incentives can positively affect the chairman Impact of term and post expected term on bank risk exposure.After changing the risk measurement method to the risk-weighted asset ratio,the conclusion is still valid,so the empirical conclusion is robust.Finally,based on the theoretical and empirical analysis of the background characteristics of the chairman that affect bank risk-taking,this article proposes the following research implications: In terms of the selection and appointment of the bank chairman,first,the selection and appointment of the chairman of the city commercial bank needs to be comprehensive consider the individual background characteristics of candidates,and focus on the characteristics of past management experience,especially the characteristics of political experience,tenure,and experience diversity,and consider the individual characteristics of senior management such as age,gender,and education.Second,match the characteristics of the candidates with the characteristics of the bank’s operations,and select a suitable bank chairman for banks with different characteristics.Thirdly,establish a reasonable tenure for the chairman of the city commercial bank,and let the tenure effectively encourage the chairman of the bank to strengthen bank management and reduce unnecessary risks.In terms of the bank’s internal operations and management,on the one hand,it is necessary to strengthen the corporate governance of the bank,effectively improve the corporate governance of the bank according to the background characteristics of the chairman,improve the governance mechanism,standardize the “three associations and one layer” system,and strengthen the functions of various departments in the actual governance process.Promote the diversified development of equity,such as joining foreign shareholders,private shares,etc.to promote the diversification and decentralization of equity structure.On the other hand,improving the bank’s internal operating strategy and adopting appropriate cross-regional operations will help to disperse bank risks;consider the impact of the length of the tenure on bank operations,and make timely adjustments;adopt appropriate incentives for executives,such as increasing equity incentives and other long-term incentive methods,increase the diversification of incentive methods,improve the effectiveness of promotion incentives;improve financial regulatory standards,such as the increase in core capital adequacy ratio,help banks to better resist risks.However,banks are not isolated financial institutions,banks are in the complex network of the financial system.Therefore,bank risk-taking is also in the process of dynamic development.Unilateral bank governance or financial supervision cannot fundamentally solve the problem of bank risks.In the future,in terms of bank risk management,in addition to effectively improving bank governance and financial supervision,it will also require the coordination and cooperation of other related industries,regulators,and government departments in various related fields.Only in order to effectively improve bank risk management.This paper analyzes the impact of the characteristics of the chairman’s experience on bank risk-taking from the perspective of individual managers with subjective initiative in the process of bank operation and management,then conducts empirical tests from the perspectives of political experience characteristics,tenure of position and experiences diversification characteristics.The main innovations are as follows: first,the research perspective is innovative.Through systematically combing the current related researches on the background characteristics of executives,we propose the mechanism by which executive experience affects bank risk-taking,and start from the political experience of the chairman of the bank.Verifying the impact of the political experience of the chairman of the city commercial bank on bank risktaking.Secondly,this study deeply explores the characteristics of the chairman’s experiences.In addition to the single experience characteristics such as political experience,we also analyze the impact of bank chairman with diversified experiences on bank risk commitment.The related research on the characteristics also supplemented the research on the influencing factors of bank risk-taking.Third,this article extends the bank chairman’s experiences in the time dimension,from past experiences to present experiences and expected future experiences.The existing tenure of chairman of the bank is discussed,and the composition of the chairman’s tenure is analyzed.What is the difference between the impact of the existing and expected tenure on bank risk exposure? The expected term of the chairman is divided into the expected term of office and the tenure of age,and the impact of different expected term on bank risk exposure is analyzed separately.Finally,this article enriches the adjustment factors that influence the relationship between the chairman’s experiences characteristics and bank risk-taking,discusses and verifies the characteristics from the chairman’s individual perspective that may affect the experiences characteristics and bank risk-taking,and also discusses the bank’s operating characteristics from the perspective of the bank level.Factors that can influence the relationship between the background characteristics of the chairman and bank risk bearing.In addition,this article also focuses on the impact of corporate governance characteristics of the bank such as the characteristics of the board of directors,equity structure,and executive incentives on the relationship between the two.It comprehensively characterizes and summarizes the factors that influence the relationship between the chairman’s experiences characteristics and the bank’s risk commitment,and provides a new research direction for commercial bank risk management research.