Deposit Insurance, Corporate Governance and Discretionary Behavior: Evidence from Thai Financial Institutions
Claiming 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.
|Date of creation:||Sep 2004|
|Date of revision:|
|Contact details of provider:|| Postal: 2-1 Naka, Kunitachi, Tokyo 186-8603|
Web page: http://cei.ier.hit-u.ac.jp/
More information through EDIRC
References listed on IDEAS
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, Asl1 & Huizinga, Harry, 1999.
"Market discipline and financial safety net design,"
Policy Research Working Paper Series
2183, The World Bank.
When requesting a correction, please mention this item's handle: RePEc:hit:hitcei:2004-15. See general information about how to correct material in RePEc.
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.