The structure of multiple banks and corporate risk management

• Main Authors: Ying-Chun Lu, 陸盈君
• Other Authors: Tai, Wei-Hsin
• Format: Others
• Language: zh-TW
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/36039105788971118418

碩士 === 國立暨南國際大學 === 財務金融學系 === 102 === Title of Thesis: The structure of multiple banks and corporate risk management Name of Institute: Department of Banking and Finance, College of Management, National Chi Nan University Pages: 49 Graduation Time: 05/2014 Degree Conferred: Master Student: Ying-Chun Lu Advisor: Dr. Vivian W.Tai Abstract The higher leverage ratio of a corporate, the higher its level of distressed risk andthe stronger its risk-shifting incentiveswill be. Hence, how lending banks, ascreditors, play their supervisory role in the hedging strategy of borrowing firms tomitigatethis agency problem between shareholders and debtholders becomes an important issue.Adopting listed non-financial firms in Taiwan from 2005 to 2009, we examine the monitoring mechanism of structure of multiple banks on corporate’shedging strategy.Bank loans ratio, lead bank loan ratio, the number of lending banks, the number of foreign lending banks, lending banks diversifcation Index and multi-bank relationship dummy variable are used to measure the structure ofmultiple banks.The empirical results show that, for healthy firms, the higher ratio of bank loans and the greater number of foreign lending banks, the more effective monitoring will be in forcing borrowers to enhance their willingness of hedging and the extent of their hedging. Meanwhile, for financially distressed firms with a higher number of lending banks, the greater divergence of lending banks, and multiple-banking relationships, the more effective monitoring of the lending banks will be in pressing the borrowing firms to pursue stronger hedging strategy which may be able to mitigatetheir risk-shifting behavior and protect creditors’ wealth. Our findings are consistent with the risk diversification hypothesis. Additionally, the association between lending banks’ structure and borrowing firms’ hedging strategy is stronger in firms with large sizes, more growth opportunities, higher profitability and greater transparency and robustness after controlling industry difference.