Governance Of The Board Of Directors, Local Government Intervention And City Commercial Banks’ Risk Behaviors

Since 2007, the city commercial Banks in China has gradually speeded up to the standard transformation of joint-stock commercial Banks. In July 2015, Jiangsu Bank A-share of Initial Public Offerings (IPO for short) application obtained the pass of China Securities Regulatory Commission (CSRC), resulting in making materially significant progress for financing of the city commercial bank back to the capital market and the governance mechanism of corporate governance which board governance is represented is building and perfecting in city commercial bank of China. At present, the city commercial bank has become very important in our banking system in power and components, and plays a significant role in perfecting market structure, promoting market competition, maintaining regional financial stability and improving regional economic development. City commercial Banks listed on the capital market financing is to open up the way for its capital expansion, but there are still some great challenges in its corporate governance, ownership structure and risk control. For example, Non-performing loan ratio of some banks rising too fast, risk management techniques, risk consciousness, and financial cases occurring, cause great harm to the reputation and security of the bank; Bank internal checks and balances mechanism failed, and there have been some serious problems of the major shareholders encroaching on minority shareholders’interests. At the same time, the local government is the controlling shareholder of most of the city commercial banks, under the "tournament" pressure, speed up the city’s economic development, attract investment and promote employment through direct intervention and easily in the means of directors, executive officers influencing city commercial bank business, which improves the bank’s risk. The problems above of city commercial Banks are caused by their corporate governance, especially as the the board of directors governance mechanism is not perfect and there is a centralization stock structure. In order to solve the current problems, we need to further improve the corporate governance mechanism of represented by the board of directors’governance.Based on this, this paper used the methods of combination of induction and deduction and statistical analysis, selected the empirical data about the city commercial banks in China from 2007 to 2013 as the sample, studied the relationship between the board governance and risk-taking behavior in the city commercial banks and examined the regulation effect of local government intervention on them. Specifically, in the induction and deduction, firstly, this paper summarized the previous studies on related theories in board governance, local government intervention and city commercial banks’risk behaviors, and explained board governance, local government intervention influence the city commercial banks’risk behaviors by principal-agent theory and resource dependence theory, and then put forward the hypothesis of this study. In the statistical analysis, based on the theoretical model, this paper tested the effect of board governance on the city commercial banks’risk behaviors, and the regulation effect of local government intervention on the relationship between board governance and city commercial banks’risk behaviors. Through empirical testing, this paper found that board governance has significant effect on city commercial banks’risk behaviors. Specifically, board meeting frequency, the average age of directors and special committee number has negative correlation with city commercial banks’risk behaviors; independent director rate and adjunct-or-not in chairman and president is positive correlated with the city commercial banks’ risk behaviors; the city commercial banks’risk behaviors is not statistically significant with board size. Based on the local government intervention, adjunct-or-not in chairman and president and the average age of directors have a strong significance of city commercial banks’risk behaviors while independent director rate and board meeting frequency have a week significance of city commercial banks’risk behaviors. In general, the conclusion of this paper provides new evidence for the relationship of board governance and risk behaviors of the city commercial banks in the period of transition. Besides, on this occasion of the local government financial crisis, there are some considerable realistic significance in the research of the relationship among the local government, city commercial banks’board governance and city commercial banks’ risk behaviors. At last, based on the relative theory, this paper provide some management suggestion on the aspects of corporate governance structure and the function of local government, then point out the shortcomings of this paper and future research suggestions are provided.