Bank connections and corporate risk-taking: evidence from China

Shengbao Zhai, Lu Xie and Sheng Zhang

Asia-Pacific Journal of Accounting & Economics, 2017, vol. 24, issue 1-2, 183-194

Abstract: This paper examines the impact of bank connections on corporate risk-taking. The results show that firms with bank connections exhibit a higher degree of corporate risk-taking than firms without bank connections, and that the difference is more prominent in provinces with a poor financial environment. Specific types of bank connections – executive and cross-shareholding connections – are further examined and we find that the effect only exists in firms with executive and bank-holding connections, not in firms connected to banks as shareholders. This demonstrates that having bank connections prompts firms to undertake more risk-taking projects and increases the magnitude of corporate risk-taking.

Date: 2017
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DOI: 10.1080/16081625.2015.1105831

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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