Does the Audit Committee Moderate the Effects of non-interest Activities on Bank Risks in China?. Issue 14 (14th November 2022)

• Record Type: Journal Article
• Authors: Cheng, Maoyong; Meng, Yu; Geng, Hongyan; Zhang, Jincheng
• Is Part Of: Emerging markets finance & trade. Volume 58:Issue 14(2022)
• Page Start: 4079
• Page End: 4090
• Publication Date: 2022-11-14
• Subjects: Non-interest activities -- audit committee -- bank risks -- China; G21 -- G32 -- G34; Balkan Peninsula -- Commerce -- Periodicals; Balkan Peninsula -- Foreign economic relations -- Periodicals; Europe, Central -- Commerce -- Periodicals; Europe, Central -- Foreign economic relations -- Periodicals; Europe, Eastern -- Commerce -- Periodicals; Europe, Eastern -- Foreign economic relations -- Periodicals; Turkey -- Commerce -- Periodicals; Turkey -- Foreign economic relations -- Periodicals; Asia -- Commerce -- Periodicals; Asia -- Foreign economic relations -- Periodicals; Eurasia -- Commerce -- Periodicals; Eurasia -- Foreign economic relations -- Periodicals; 382.05
• DOI: 10.1080/1540496X.2022.2083952
• Languages: English
• ISSNs: 1540-496X

Abstract

ABSTRACT: Using Chinese data from 2000 to 2019, we investigate whether the audit committee moderates the effects of non-interest activities on bank risks. Three main results emerge. First, insolvency risk, portfolio risk, leverage risk, and return on assets (ROA) volatility increase if banks increase their non-interest income share. Second, the negative effects of non-interest activities on bank risks are weaker in banks with more financial expertise or longer board tenure of audit committee members. Channel tests show that the audit committee mitigates the risks from non-interest activities by increasing bank supervision. Finally, when we divide non-interest activities into trading activities and commission and fee activities, the results show that more financial expertise or longer board tenure for audit committee members mainly weaken the negative effects of trading activities on bank risks.