Effect Of Corporate Governance On Bank Risk Taking

Economy is the lifeblood of the nation and finance is the foundation of theeconomy, while the bank is a key link in the process of financial, so the developmentof banks has a vital role to the development of national economy. With the continuousdevelopment of economic globalization, banks make a profit from it and at the sametime banks face more and more risks, especially in recent years the outbreak ofthe economic crisis causes people to realize that control bank risk is an importantmeans to stabilize the economy, so more and more scholars begin to study how tocontrol bank risk taking. Numerous studies have shown that good corporategovernance mechanisms improve the bank’s risk management and have a positiveeffect to promote economic stability. So more and more people have focus on howcorporate governance factors affect bank risk taking, how to improve corporategovernance to ensure the benefits of banks while effectively reducing the risk. So thisarticle from the perspective of corporate governance studies the influence ofcorporate governance on bank risk bearing and proposes appropriate policyrecommendations of corporate governance problem.This paper carries on the analysis from the particularity of the bank. From2005to2012,14commercial Banks in China as the research object, respectively from theaspects of external corporate governance, ownership structure, the size of the board ofdirector and supervisors, executive pay to establish model, analyzes its impact onbank risk-taking. It is concluded that capital adequacy ratio, franchise value, the firstbig shareholder ownership, board size, independent directors’ proportion, executivepay and bank risk-taking has significant negative correlation, the size of thesupervisory board and bank risk taking has a negative correlation, but notsignificantly, state-owned shares proportion and bank risk-taking has significant positive correlation. It can be seen that external governance can effectively restrainbanks’ risk, government for bank regulation should continue to effectively, not berelax. And the board of supervisors in China although have effect on banks’ risk, butthe effect is not significant. The internal corporate governance need to improve theindependence of the board of supervisors.