Investigation corporate governance characteristics on risk taking: A case study of private banks listed in Tehran Stock Exchange

During the past few years, there have been tremendous works on detecting the relationship between banks performance and the number of seats on board of directors. Board of directors of banks is responsible for shareholders ownership’s interest. In this study, governance and ownership characteristics affecting risk appetite on some private banks listed in Tehran Stock Exchange is studied. The study investigates 12 private banks for a period 2005-2011 based on the implementation of some regression analysis using panel data. The results indicate that the effect of five major shareholders on risk-taking is positive and significant. The effect of institutional ownership on risk-taking is negative and significant. Effects of other variables, including the percentage of ownership concentration, return on assets and the logarithm of cash from operations (CFO) on risk-taking of the private banks are not significant. The effects of board size, reliance on debt and log of assets on risk-taking are significantly negative among private banks in Iran. These results indicate that shareholders that are institutional investors play a key role in monitoring managers.