Politically connected CEOs and risk-taking behaviour: comparative evidence from private and foreign-owned banks in China

Haithem Awijen, Hachmi Ben Ameur, Nidhaleddine Ben Cheikh and Younes Ben Zaied

International Journal of Business Governance and Ethics, 2024, vol. 18, issue 4/5, 522-553

Abstract: This study investigates the effect of CEOs' political connections on the risk-taking behaviour of banks in China over the period 2003-2017. Using both credit and insolvency risk measures, we show that political connections have a positive effect on banks' risk-taking behaviour. Bank ownership structure also positively moderates the relationship between political connections and risk-taking. Our empirical results have important policy implications for investors and the government. We highlight the importance of CEOs' political connections, which potentially play a role in determining a bank's risk-taking behaviour. Finally, our results are robust to alternative bank risk and ownership variables.

Keywords: political connections; bank risk-taking; ownership structure; ownership concentration; China. (search for similar items in EconPapers)
Date: 2024
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