Does Executive Compensation Promote Bankers' Excessive Risk Taking? Professor and doctoral supervisor HONG Zheng from Institute of Chinese Finance Studies (ICFS) of SWUFE published his paper in the fourth issue of China Economic Quarterly in 2014 entitled “Does Executive Compensation Promote Bankers' Excessive Risk Taking? ---Evidence from Chinese Real Estate Lending Market”. Through empirically testing the relationship between China’s bank executive compensation and real estate lending, the paper finds that real estate lending is positively related with bank executive compensation; furthermore, the relationship is inverse “U” shaped. When executive compensation begins to increase, bankers take excessive risk by extending more real estate lending, after the threshold, bankers become conservative to reduce the credit. The paper also shows that increased compensation generally promotes risk taking for city and rural banks, while prevents such action for national banks. The results have several implications for financial executive compensation reform. In order to prevent financial risks, especially to suppress the current real estate bubble, it is of great necessity to reform China's financial executive compensation system and strengthen supervision.

Prof. HONG Zheng is quite accomplished in the research of bank corporate governance. In July 16, 2014, a major project with Prof. HONG Zheng as the head concerning the "Research on the Optimization of Corporate Governance of Urban Commercial Banks in China: Based on the Duality of Private Capital Entry and Bank Corporate Governance” was officially approved. The program was examined and approved via Ministry of Education as an important project for the research base of humanities and social sciences. The project is set to be conducted from six aspects: the current status, problems and causes of corporate governance of urban commercial banks in China; the relationship between the local government and corporate governance of urban commercial banks in China; the interaction among the characteristics of banking industry, changes in conflicts of interest and the particularity of bank corporate governance etc. As it was scheduled, the research results are about to take the form of mid-term research results research report and publicly published papers, as well as the final research consultation papers and monograph. The project is planned to be completed in June 2016. Relevant research findings will be submitted to regulatory agencies, banking associations, local governments and other interrelated decision-making departments for reference, so as to optimize the current corporate governance of city commercial banks in China. And the ultimate goal of this research project is to make a contribution to the transformation and development of the banking industry.