The Empirical Study On The Influences Of Corporate Governance On The Risk-Taking Behavior Of Commercial Banks In China

Banks exist and develop due to risks, but the excessive risk-taking behavior in the banking industry resulted on four serious banking crises over the past 30 years, and these banking crises making people more profound understanding the importance of good corporate governance of banks to control bank's risk-taking behavior. Therefore, this paper takes the influences of corporate governance on risk-taking behavior of commercial banks as the research object. Firstly, this paper theoretically analyzes the influences of ownership structure, incentive and constraint mechanism, board, supervisory board, capital adequacy ratio, franchise value, deposit insurance system,market discipline and other factors on risk-taking behavior of commercial banks. Then, using panel data from the annual reports of the eight listed banks from 2001 to 2008 in China, this paper studies empirically the influences of corporate governance on risk-taking behavior of commercial banks in China. The results are as follows: 1. The relation between the first shareholder's shareholding proportion and risk-taking behavior is∪-shaped non-linear relationship in the joint-stock commercial banks; it is a significant positive correlation between the top 5 shareholder's shareholding proportion and risk-taking in the joint-stock commercial banks, consistent with the moral-hazard hypothesis. But the Sum of Squares of the top 5 shareholder's shareholding proportion is negatively correlated to the risk-taking in the Joint-stock commercial banks. 2. The managerial ownership has no significant influence on the risk-taking in the joint-stock commercial banks. The relation between board size and risk-taking behavior is∪-shaped non-linear relationship in the joint-stock commercial banks. It is a significant positive correlation between supervisory board size and risk-taking in the joint-stock commercial banks. The annual salaries of management, the proportion of independent directors are negatively correlated to the risk-taking in the joint-stock commercial banks. 3. The capital adequacy ratios, the franchise value, the deposit growth rate are negatively correlated to the risk-taking in all samples banks. The state implicit deposit insurance system reduces the self-regulation effect of the franchise value of state-owned banks; the relation between the state shareholdings proportion and risk taking behavior is∩-shaped non-linear relationship in the state-owned commercial banks. The state-owned banks'listing doesn't reduce banks'risks in short-term. Financial leverage is positively correlated to the risk-taking in all samples banks. Asset size is negatively correlated to the risk-taking in all samples banks. Finally, this paper proposes policy suggestions improving corporate governance of banks in order to prevent banks from excessive risk-taking behavior.