Chinese bank regulatory compliance and its connection with CEO political ties, ownership, and board gender

The present study investigates the link between CEO political connections and regulatory bank reprimands in China. We identify a resilient inverse relation. We explore this relationship in terms of a Chinese bank’s (1) ownership characteristics, (2) risk-taking behavior, and (3) board attributes. The non-criminal enforcements we consider occur with considerable frequency and usually serve as reprimands. However, the visibility of such reprimands suggests significant risk of reputational loss for politically connected bank leaders. Study findings indicate a strong inverse association between such enforcements and a CEO’s state-level political connections. This relation weakened following China’s 2013 anti-graft reforms. We also report lower reprimand rates in banks with female board members. Likewise, lower rates are apparent in banks combining CEO political connections with concentrated ownership. However, such positive effects principally relate to non-SOE banks.