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Bank governance, legal supervision, and related-party transaction risks

Author

Listed:
  • Wu, Houze
  • Wu, Wei
  • Yan, Yue

Abstract

Banks are a core actor in the economy and can trace transaction records promptly. This research delves into the governance role of banks in diminishing related transaction risks. Leveraging rich empirical evidence from China, this research documents that the strength of bank governance substantially lowers related-party transaction risk. This effect is even stronger in the context of a weak legal system. Additional tests show that strict loan review and effective risk warnings mediate the relationship. Overall, this research offers novel insights into the risk management role of banks and legal systems, thereby enriching relevant studies.

Suggested Citation

  • Wu, Houze & Wu, Wei & Yan, Yue, 2026. "Bank governance, legal supervision, and related-party transaction risks," Finance Research Letters, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:finlet:v:88:y:2026:i:c:s1544612325023414
    DOI: 10.1016/j.frl.2025.109092
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    References listed on IDEAS

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