Deposit Insurance, Corporate Governance and Discretionary Behavior: Evidence from Thai Financial Institutions
AbstractClaiming that the implicit cost of deposit insurance is an alternative proxy for risk-taking behavior, we examine the effects of incentive-inducing ownership and entrenchment of the largest shareholders and discretionary behavior of the management on the risk of Thai financial institutions. Our empirical results suggest that, during 1994-1996, the largest shareholders engage in low risk-taking activities when they hold large cash flow rights and have low deviation of cash flow from control rights. However, the risk is higher when the largest family shareholder enters the board and when Chairman-CEO can manipulate loan loss provisions. After the financial crisis, earnings management through discretion on loan loss provisions reduces risk. Overall, this study suggests that the problems underlying the implicit guarantee scheme are different between banks and finance companies, and between types of governance structure.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2004-15.
Length: 43 p.
Date of creation: Sep 2004
Date of revision:
Implicit guarantee; Risk; Ownership Structure; Managerial Discretion; Thai Financial Institutions;
Find related papers by JEL classification:
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Demirguc-Kunt, Asli & Huizinga, Harry, 1999.
"Market Discipline and Financial Safety Net Design,"
CEPR Discussion Papers
2311, C.E.P.R. Discussion Papers.
- Pathan, Shams & Skully, Michael & Wickramanayake, J., 2008. "Reforms in Thai bank governance: The aftermath of the Asian financial crisis," International Review of Financial Analysis, Elsevier, vol. 17(2), pages 345-362.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Reiko Suzuki).
If references are entirely missing, you can add them using this form.