Empirical Research on Credit Risk Management Performance of Commercial Banks Based on Governance Structure

The American Subprime Mortgage Crisis shows that credit risk management is very important to commercial banks, and a perfect governance structure is the basis of effective credit risk management. Using non-performing loan ratio to measure credit risk management performance of commercial banks, this paper does an empirical study on the influence of governance structure on credit risk management performance of China's commercial banks. The result shows that credit risk management performance of commercial banks is positively correlated with hoard size and independent director ratio; and it's negatively related to the number of directors holding posts in manager tier. However, the shareholding ratio of major shareholders, foreign strategic investor shareholding and senior management compensation have no explanatory power on credit risk management performance. Therefore, increasing independent director ratio is an effective way to improve credit risk management performance of China's commercial banks. Also, board size should be enlarged properly and the number of directors holding posts in manager tier should be reduced. However, raising senior management compensation or introducing foreign strategic investors lack positive meanings to credit risk management.