Bank Governance and Bank Capital
36 Pages Posted: 14 Aug 2014
Date Written: August 14, 2014
This study examines the impact of bank ownership and bank governance on capital. Using Japanese commercial banks as a sample over a Basel II period (2007-2012), we investigate the impact of bank ownership and management structure on the level of bank capital. Our results suggest that institutional and foreign ownership tends toward a higher level of capital for the sake of risk-taking. In contrast though, inside directors are more concerned with their undiversified human capital risk, thus reluctant to increase capital for a higher level of risk-taking. Additionally, board size, independent directors, and outside directors positively affect the level of capital, revealing the conservatism of these directors in maintaining higher capital levels to prepare for unexpected losses.
Keywords: G21; G28; G32
JEL Classification: capital, bank governance, bank ownership, market discipline
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