Issue Of Supervision, Managers' Behavior And Bank Governance

The Banking vigorous developments drew widespread attention from academia, and so did its potential risks.The former were defined as the Deepening of Finance, and the latter would be given a new concept—Risks of Governance.This paper was based on the above theoretical background:By focusing on issues such as Supervision and Managerial Behavior,we distinguished commercial bank from general enterprise, via describing its unique characteristics—will no longer be art aggregate of contravention belong to shareholder and manager,defined by traditional Principal-Agency theory,but a complex form of corporation which attached financial supervisory authority great importance to,and meanwhile,kept significant relationship with upriver and downriver sectors on the Financial industry chain. Beginning with the nature of commercial bank,this paper analyzed the interaction among financial supervisory authority,shareholder of commercial bank and manager of commercial bank by using Game Theory,in order to present the original characteristic of commercial bank to potential readers.This paper contains five parts in all:Chapter 1 is the starting point of our issue,containing background,significance, design and structure,innovation and shortage.Chapter 2 summarizes existing literature in relational area,containing the theory of Financial Intermediation,the theory of Principal-Agency,Shareholder and Bank Governance,Manager and Bank Governance,Supervision and Bank Governance.Chapter 3 and Chapter 4 are the straight matter,investigates our issue in two ways:theoretical analysis and empirical analysis.Chapter 5 provides our conclusion and corresponding proposal.In the part of theoretical disquisition,we constructed three Game Theory models: Manager-Tunneling under supervision's exogenous assumption,Manager-Tunneling under supervision's endogenous assumption and managers' choice of assets portfolio. We also divided one three-side Game under supervision's endogenous assumption into Shareholder-Supervisor alliance and Shareholder-Manager alliance,two two-side Games,so as to simplify the theoretical difficulty.No matter which method we used to analyze,the financial supervisory authority would always be a powerful deterrent to managers:supervisor's exertion under exogenous assumption prevented tunneling from actualizing,non-zero probability of punishment under endogenous assumption induced manager considering the large amount of tunneling cost,and the supervisor strict implementing Capital-Supervision constituted by Basel Committee reduced the probability of high-risk portfolio chose by manager.In the part of empirical disquisition,we chose 148 small-size financial institutions in Shandong Province as research sample.Via statistical analysis and regressive analysis of cross-sectional data,we accomplished research work such as sensitivity of managers' compensation based on performance and assets portfolio of commercial banks.As a result of empirical disquisition,theoretical models' validity had been proved:managers' compensation based on performance was restricted by internal governance of commercial banks,and punishments to managers significantly restrained higher Risk-Taking of commercial banks.Basing on theoretical model and empirical test,we considered that commercial banks were not only the hinge of socio-economy,providing supervision and credit for market,but also a part of market-failure,needing necessary regulation and supervision.Functional mechanism of Bank Governance rooted in internal arrangements and external arrangements,internal arrangements contained design of organization and operation,and the main representative of external factor was a powerful supervisor.Paying some expenses for supervision,the financial supervisory authority maintained financial markets' stabilization and induced financial institution keeping low-risk operation,which were dual benefits.And the conductive mechanism of above proposition needed academia deeply regard.