Corporate governance and systemic risk: Evidence from Chinese-listed banks

Abstract

This research empirically examines the influence of internal and external governance on bank systemic risk. Employing data of listed banks in China during 2007–2020, the results show that the factors of a strong board, salary compensation, and ownership governance contribute to mitigating systemic risk. Different from U.S. banks and European markets, institutional investors play a monitoring role in containing excessive bank risk-taking. Our findings further indicate internal governance complements external governance at improving financial stability and offer implications that banks should improve the effectiveness of internal governance and governments should actively encourage institutional investors to engage in corporate governance.