Corporate governance in banking industry

This thesis highlights the importance of corporate governance in the banking industry and investigates several research questions in the banking governance. This thesis first extends the existing literature on the role of CEO personal characteristics in bank risk-taking by showing that the economic conditions at the time when bank CEOs enter the labor market have a significant impact on risk-taking. The result indicates that banks managed by CEOs who started their careers during recessions (i.e., recession CEOs) take less risk than their non-recession counterparts do. In addition, recession CEOs are more likely to implement conservative bank policies, have a traditional bank business model, and are negatively related to bank opaqueness. Furthermore, banks with recession CEOs produce superior performance during the recent financial crisis, while they do not outperform those with non-recession CEOs in general or over the pre-crisis period. The second empirical research extends and complements the existing literature on the spillover effects of bank mergers on borrowing firms by showing that borrowers improve CSR performance in response to the potential changes of the existing lending relationship. The effects are stronger among borrowers more reliant on services from merging banks when mergers lead to larger changes in banks’ monitoring and financing of borrowers. The positive effect of bank mergers on borrowers’ CSR performance persists after addressing endogeneity concerns and is robust to the introduction of additional robustness checks. This thesis also investigates the effects of CSR investment in banks on their merger and acquisition payment method by showing that banks with better CSR performance are more likely to use the cash-dominated payment to finance their merger deals. Results also show that there exists a positive relationship between bank CSR performance and returns around the bank merger announcement. In addition, after examining long-term performance after the bank merger, results indicate the strategic choices of banks that conducting CSR actives. Overall, these findings in this thesis demonstrate the importance of CEOs’ managerial characteristics in banks, impacts of bank mergers and bank CSR activities engagement, which providing implications to bank board when recruiting bank CEOs and bank policy-makings.