Impact of Characteristics of Board of Directors Towards Risk-Taking Level with Chinese Commercial Banks

Abstract

Based on the situation that the overall economy is facing a huge shock due to COVID-19, China's banking sector plays an extremely important role as a provider of funds in the social economy and risk management is even more important. Therefore, this paper uses the Chinese commercial banks as a research sample of 730 from 2017 to 2021 and explores the moderating role of three board structure characteristics, namely, the board size, the combination of chairman and president, and the proportion of independent directors, on the relationship between banks' operation risk include market risk, credit risk and liquidity risk and risk-taking level in empirical approach method. The research findings revealed that: 1. liquidity ratio and cost-to-income ratio have a significant negative effect on the risk-taking level of commercial banks. 2. Board size has a negative moderating effect on the relationship between liquidity ratio and risk-taking level, which means that a larger board size can help reduce the effect of liquidity ratio on the risk-taking level of commercial banks. 3. Board size has a negative moderating effect on the risk-taking level of commercial banks. 4. The separation of chairman and president has a positive moderating effect on the relationship between liquidity ratio and risk-taking level, which means that having a different chairman and president may increase the impact of poor liquidity ratio on the risk-taking level of commercial banks. However, the cross-section of the cost-of-income ratio and independent director ratio has no significant effect on the risk-taking level. This paper also makes recommendations based on the findings of the study.