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Title: Political connections, corporate governance and credit risk : empirical evidence from Chinese commercial banks
Author: Liu, Yang
ISNI:       0000 0004 7655 5918
Awarding Body: Glasgow Caledonian University
Current Institution: Glasgow Caledonian University
Date of Award: 2017
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Although recent studies in corporate governance have paid notable attention to the value of political connections and the performance of corporate boards following a wave of scandals across the globe, we know relatively little about whether the distribution of power between politically connected CEOs and the composition of board of directors has much impact on managerial risk-taking behaviour in emerging countries. In this study we examine the impact of politically connected CEO, the monitoring role of independent directors and the extent of the actual control of ownership concentration on credit risk in Chinese banks over the period of 2003-2014. We used two-step system generalized method of moment (SGMM) to measure a sample data of 88 banks in Chinese commercial banks. Subsequent robustness checks, were conducted by adding governance variables and different time periods to support main results and address the endogenous problems by using the two-step system generalized method of moment (SGMM) estimator. We find that politically connected CEO has a positive impact on credit risk while the proportion of independent directors exerts negative and significant influence on credit risk. Our sub-sample analysis based on ownership type indicates that government ownership of bank is more susceptible to credit risk while independent directors in private banks tend to be effective monitors and controls. The results are robust after controlling macroeconomic and bank-specific variables. Moreover, we also examine the relationship between the degree of ownership concentration and the default risk of Chinese commercial banks. The results find that the ownership concentration of GOBs and POBs has negative and positive influences, respectively. The thesis found that politically connected CEOs are positively and significantly associated with the credit risk of Chinese commercial banks. However, the presence of independent directors has a negative and significant impact on the credit risk of the Chinese banking system. Regarding bank ownership structure, the study shows that the degree of ownership concentration exhibited a negative/positive and significant effect on the credit risk of the Chinese banking industry. Further analysis using sub-samples divided into different types of Chinese commercial banks, namely, the government ownership of banks (GOBs) and private ownership of banks (POBs). Overall, our study sheds light on the influences of political connections on credit risk in Chinese commercial banks. This study can be used to equilibrate the distribution of power in respect of monitoring arrangement and decision-making on credit risk, contribute to the agency theory and resource dependence theory. In fact, this study has the implication of good corporate governance which is able to ameliorate excessive risk-taking and control credit risk.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available