Impact Of Corporate Governance On Commercial Banks’ Risk-taking In China

Basel Committee on Banking Supervision and Administration Commission has issued more than one paper to emphasize on the importance of sound corporate governance mechanism for enhancing the ability of commercial banks to guard against risk; the role of sound corporate governance to reduce commercial banks’risk is also reflected in "Basel Ⅱ"; the subprime mortgage crisis mercilessly expose all the shortcomings and deficiencies of the corporate governance in the U.S. banking sector. Corporate governance’s significant impact on commercial banks’ risk-taking has already become the consensus of the community. With the continuous development and further opening degree of China’s financial market, China’s commercial banks are facing more and more diverse risk. In this context a clear understanding of the relationship between the corporate governance and commercial banks’ risk-taking in China is very important for improving the corporate governance of China’s commercial banks and helping banks to guard against the risk they face.This article firstly selects six representative banks from the listed commercial banks in China; and analyzes the status and characteristics of commercial banks’ corporate governance in China from the aspects of ownership concentration, shareholding property, Board Governance, Supervisory Board governance and incentive mechanism. Secondly, author theoretically analyzes the impact of ownership structure, supervision mechanism and incentive mechanism on commercial banks’ risk-taking in China. Finally, author empirically tests the impact of corporate governance on sample banks’ risk-taking based on the data of listed banks. Based on the theoretical analyze and empirical test, combined the status and characteristics of commercial banks’ corporate governance in China, this paper draws following main conclusions:(1)highly concentrated ownership structure has a positive impact on commercial banks’ risk-taking in China;(2)excessive state ownership has a negative impact on commercial banks’ risk-taking in China;(3)the size of Board has no significant effect on commercial banks’ risk-taking in China;(4)the introduction of independent directors has a positive impact on commercial banks’ risk-taking in China;(5)the increasing scale of Supervisory Board has a negative impact on commercial banks’risk-taking in China;(6)the introduction of external supervisors has a negative impact on commercial banks’risk-taking in China;(7)current remuneration incentive mechanism has a negative impact on commercial banks’ risk-taking in China.