Corporate Governance and Performance of Listed Commercial Banks during Financial Crisis: Evidence from China’s Banking Industry
AbstractThis paper examines the impact of corporate governance on bank performance. Using a sample of China’s listed commercial banks from years 2007 to 2009, we investigate how corporate governance practices affect the performance of China's listed banks during financial crisis. We use two-stage least squares (2SLS) regression to solve the well-known endogeneity problem in corporate governance literature, and compare our results to OLS regression of bank performance on governance mechanisms. A number of interesting findings are yielded in our study. First, there are an inverted U-shaped relation between board size and bank performance, and between proportion of independent directors and performance. Second, the banks whose controlling shareholder is the State can generate better performance than other banks. Third, the shareholding of the largest shareholder affects bank performance but its effect is non-linear, while the shareholding of other large shareholders affects negatively on the bank performance. Fourth, executive compensation incentives have a significant positive impact on bank performance. Our results are robust to various specifications.
The journal is published under the terms of the Creative Commons Attribution (CC BY) License which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
Copyright on any research article in a journal published by a Journal is retained by the author(s). Authors grant Washington Institute of China Studies a license to publish the article and identify itself as the original publisher.
The Creative Commons Attribution License (CC BY) allows users to copy, distribute and transmit an article, adapt the article and make commercial use of the article. The CC BY license permits commercial and non-commercial re-use of an open access article, as long as the author is properly attributed.