No Access

WHAT IS THE RELATION BETWEEN NON-PERFORMING LOANS, CORPORATE GOVERNANCE, AND LENDING BEHAVIOR FACTORS?

JOE-MING LEE

Department of Applied Economics, Fo Guang University, Add. No. 160, Linwei Rd., Jiaosi Shiang, Yilan County 26247, Taiwan, ROC

E-mail Address: jmlee@mail.fgu.edu.tw

Search for more papers by this author

https://doi.org/10.1142/S0217590819500590Cited by:0 (Source: Crossref)

Abstract

This research highlights the special problems facing the corporate governance of financial intermediaries and combines this theoretical perspective with bank observations in order to offer policy recommendations for their industry. The standard agency theory defines the corporate governance problem in terms of how equity and debt holders influence managers to act in the best interests of those providers of capital to firms. The results show that the relationship between directors’ collateralized shares, loan concentration and a bank’s non-performing loans has a significant positive, indicating that bad corporate governance and loan concentration are important warning signs for banks.

Keywords:

JEL: C23, D24, G21

References

Amin, AS, MO Imam and M Malik (2019). Regulations, governance, and resolution of non-performing loan: Evidence from an emerging economy. Emerging Markets Finance and Trade, 1–23. Web of Science, Google Scholar
Brewer, E, G Kaufman and L Wall (2008). Bank capital ratios across countries: Why do they vary? Journal of Financial Services Researches, 4, 177–201. Web of Science, Google Scholar
Bernanke, B, M Gertler and S Gilchrist (1998). The financial accelerator in a quantitative business cycle framework. NBER Working paper, No. 6455. Google Scholar
Bernanke, BS, M Gertler and S Gilchrist (1999). The financial accelerator in a quantitative business cycle framework. In Handbook of Macroeconomics, Vol. 1, pp. 1341–1393. Google Scholar
Ciccarelli, M, A Maddaloni and J-L Peydró (2010). Trusting the bankers: A new look at the credit channel of monetary transmission. European Central Bank Working Paper Series No. 1228. Google Scholar
Ewert, R, G Schenk and A Szczesny (2000). Determinants of bank lending performance in Germany: Evidence from credit file data. Schmalenbach Business Review, 52, 344–362. Google Scholar
Jensen, M (1988). Takeovers: Their causes and consequences. Journal of Economic Perspectives, 2, 21–48. Web of Science, Google Scholar
Jensen, MG and WH Meckling (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3. Web of Science, Google Scholar
Jian, M and TJ Wong (2004). Earnings management and tunneling through related party transactions: Evidence from Chinese corporate groups. Working paper, Nanyang Technological University and Hong Kong University of Science and Technology. Google Scholar
Omay, T and EÖ Kan (2010). Re-examining the threshold effects in the inflation–growth nexus with cross-sectionally dependent non-linear panel: Evidence from six industrialized economies. Economic Modelling, 27(5), 996–1005. Web of Science, Google Scholar
Ozili, PK (2019). Non-performing loans and financial development: New evidence. The Journal of Risk Finance, 20(1), 59–81. Web of Science, Google Scholar
Pedroni, P (2004). Panel cointegration: Asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Econometric Theory, 20(1), 597–625. Google Scholar
Pesaran, MH (2004). General diagnostic tests for cross section dependence in panels. CESifo Working Paper No. 1233, pp. 255–260. Google Scholar
Sapienza, P (2004). The effects of government ownership on bank lending. Journal of Financial Economics, 72, 357–384. Web of Science, Google Scholar
Ucar, N and T Omay (2009). Testing for unit root in non-linear heterogeneous panels. Economics Letters, 104(1), 5–8. Web of Science, Google Scholar
Uchida, H and R Nakagawa (2007). Herd behavior in the Japanese loan market: Evidence from bank panel data. Journal of Financial Intermediation, 16(4), 555–583. Web of Science, Google Scholar