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Risky Lending: Does Bank Corporate Governance Matter? (Faleye O., Krishnan K.)

Bank Lending Corporate Governance in Banking Risk-taking and Risk Management

Abstract We study the effects of a bank’s corporate governance structure on its lending practices. We find find that the probability of lending to high risk borrowers increases with board size and CEO-chair duality but declines with the fraction and equity ownership of independent directors and the CEO’s equity-based compensation. In addition, stronger board oversight increases the probability of a bank syndicating its loan offerings and imposing financial covenants in loan contracts. The risk premium charged to high risk borrowers also increases with the strength of board oversight. Overall, our results suggest that effective corporate governance can help control bank risk by reducing risky lending practices.
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Libref/ Faleye O., Krishnan K. (2010) "Risky Lending: Does Bank Corporate Governance Matter?", 23rd Australasian Finance and Banking Conference 2010 Paper, pp. 1 - 41
© Программирование — Александр Красильников, 2008
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