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The Effects of Protected Depositors’ Proportion on Savings Banks Default Risk: Outside Directors’ Social Relation with CEO and Academic Expertise

  • Journal of Insurance and Finance
  • 2019, 30(4), pp.31-61
  • DOI : 10.23842/jif.2019.30.4.002
  • Publisher : Korea Insurance Research Institute
  • Research Area : Social Science > Business Management
  • Received : July 31, 2019
  • Accepted : November 22, 2019
  • Published : November 30, 2019

Sungsoo Ha 1 Kim Hakkon 1

1충북대학교

Accredited

ABSTRACT

The purpose of this study is to investigate the effect of protected depositors’ proportion on the default risks of savings banks. This study also analyzes how the social relation between CEO and outside directors and academic expertise of outside directors effect on the relationship between protected depositor ratio and default risks. The empirical results are summarized as follows. First, the proportion of protected depositors has a significant and positive effect on default risk. Second, the positive relationship between protected depositor ratio and default risks is higher in the group where social relation (between CEO and outside directors) is strong than weak group. Third, the academic expertise level of outside directors does not have a discriminatory effect on the relationship between protected depositors’ proportion and savings banks' default risks. Our results suggest that savings banks with a high proportion of protected depositors who has low incentive to monitor savings banks have a high probability of insolvency.

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