The Empirical Research On The Relationship Between Banks Concentration?executive Compensation And Risk-taking

Reforming and opening up so far,China's banking industry has undergone a variety of changes,which is more obvious is the changes of market structure.With the continuous reduction of bank's access threshold,China's banking industry from the initial four state-owned banks gradually developed to the flourishing situation caused by the competition among joint-stock banks,city firms,agricultural firms and others.Another obvious change is the reform of bank's executives pay.In recent years,the state has issued a lot of documents requiring commercial banks to implement performance-based pay system.It is enough to see the country's attention.The changes of the banking appeals to the researchers' attention.There are three opinions about how concentration effects the banking's risk-taking and no conclusion:positive correlation,negative correlation and U-shape relationship.The relationship between the commercial bank's risk-taking and executive pay also forms these three views.And they have not yet achieved uniform.Moreover,as the concentration of the industry increased,the market demand for talents will rise,and the development of attractive compensation system is one of the important means to attract the talents.Although there have been many results about the two factors how to influence banks' risk-taking,there are few papers talking about how the two factors effect risk-taking together.And there is few paper taking the way of payment into consideration.Based above,this paper will talk about how the two factors affect the banks' risk-taking concluding the way of payment.This paper select ten banks because their data is easy to get.The first half are nationalized bank,and the last half are stock-holding banks.About the city commercial banks,because they are too small,we don't talk about them.First,this paper combines the lectures and the realities to raise hypothesizes:1.the relationship of concentration and risk-taking is "U" shape;2.the relationship of payment and risk-taking is "U" shape.Second,this paper use panel fixed effect model to get the results.The results of regression verified our hypothesizes.And the results show that,the concentration of banks have arrived a good position.But the payment levels of nationalized banks are too low while stock-holding banks' levels are too high.And the direction of the payment's "U" shape are inverse.Third,this paper use a dummy variable to test the robustness of the above results.The method is panel random effect model.The result showed that whether it belongs to nationalized banks our results are robust.So we get the conclusion:the relationship of concentration.payment and risk-taking are both "U" shape.About the banks' characteristics,our results show the bigger the bank is,the lower risk it takes.While the result about N?(non-interest income)is just the reverse.It also shows that,the bigger ROA(returan of asset),the bigger bankruptcy risk and lower credit risk.So does the LAR(liability asset ratio).Because there is the cost of bankruptcy.The higher ROA may enhance the managers' confidence about the development of banks.About the macroeconomic effects,our results show that,the bigger the GDP is,the bigger the risk-taking is.Maybe the managers think the market will go better,they want to take more risk to gain more profits.