Capital Supervision,Executive Incentives And Commercial Bank Risk Taking

The capital supervision of banks in the implementation process will be affected by the bank’s internal governance mechanism.The factors of the bank’s internal governance mechanism are the core and key when the bank implements the capital supervision policy.The incentives for bank executives are very important for the bank’s internal governance mechanism.A ring.Bank executives,as leaders of the daily operations of banks,have a very important influence on the implementation process and results of capital supervision.When bank executives implement capital regulatory requirements,their own risk appetite will affect the effectiveness of the implementation of capital regulatory requirements.Without a review of the interactive relationship between capital regulation and executive incentives,it is difficult to ful y reflect the ultimate effect of capital regulation.Therefore,exploring the impact of bank executive compensation incentives on the effect of capital supervision is an important question that needs to be answered urgently.In addition,the executives of state-owned banks cannot simply be regarded as professional managers in the true sense.Most of them have the dual status of government officials and professional managers,and in many cases they are even more inclined to be government officials.Executives of state-owned banks are generally motivated by the effects of political promotion.The role of political promotion incentives as an incentive tool in suppressing bank risks and promoting the sound operation of banks is worthy of further discussion.This paper expounds the relationship between capital supervision and bank risk taking from the perspective of theory and evidence.In the relationship between capital supervision and bank risk-taking,the effect of executive compensation incentives as a regulatory variable and executive political promotion incentives as secondary adjustment variables The impact on the effectiveness of executive compensation incentives.First,the paper reviews the existing literature on capital regulation,executive compensation incentives,executive political promotion incentives,and bank risk exposure.Secondly,according to the relevant theories studied in this paper and the existing literature research results,the impact of capital supervision on bank risk exposure is analyzed.The first hypothesis of this paper is proposed,that is,capital supervision can effectively reduce the risk-taking level of commercial banks.Thirdly,according to the relevant theory of executive incentives and the results of existing literature research,this paper proposes the second hypothesis that executive compensation incentives will weaken capital supervision and restraint in the adjustment role of executive compensation incentives in the relationship between capital supervision and bank risk-taking.The positive role of bank risk.Finally,considering the political promotion incentives faced by China’s state-owned bank executives,the political promotion incentives are regarded as secondary adjustment variables,and the impact of political promotion incentives on the adjustment of compensation incentives.According to relevant theories and literature analysis,this paper proposes The third hypothesis,that is,the executive promotion incentives can effectively curb the negative impact of compensation incentives on the effectiveness of capital supervision.This paper takes the data of 117 banks from 2001 to 2017,including all large state-owned banks,joint-stock banks,and some city commercial banks and rural commercial banks as samples,and uses fixed-effect regression models for regression estimation.The empirical results show that capital supervision can effectively reduce the level of bank risk tolerance.In addition,executive compensation incentives will weaken the positive role of capital regulation in curbing bank risks and executives’ political promotion incentives can effectively curb the negative impact of compensation incentives on capital regulation.In addition,the paper also verifies that the executive compensation incentives weaken the mechanism of capital supervision to curb the bank’s risk effect,that is,the bank evades supervision and conducts regulatory arbitrage activities through the development of shadow banking,and thus leads to an increase in the level of risk taking.