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| The Impact of Data Governance on Bank Risk: Empirical Evidence Based on Guidelines for Data Governance of Banking Financial Institutions |
| ZHAO Jing, LIU Shujiang
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| School of Finance and Statistics, Hunan University |
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Abstract With the development of digital technologies, banks have been undergoing digital transformation. Digital transformation has become a key factor for banks to enhance their core competitiveness and improve operational efficiency. However, banks face various issues with their data such as inaccuracy, lack of timeliness and inconsistent standards. Low-quality data may lead to poor decision-making, prevent banks from optimizing risk management and improving efficiency, and ultimately have an adverse impact on the high-quality development of banks. Data governance is a necessary means to improve data quality. Thus, it is evident that data governance serves as an important focus in banks' digital transformation and a key point in optimizing the risk management system of banks. To guide banks in strengthening data governance, China has introduced a series of policies enhancing data governance. Under the guidance of regulatory policies, data governance in banks has progressed rapidly. Many banks have vigorously promoted data governance and significantly improved data quality to support their risk management. However, some banks still fail to improve data governance effectively. Based on the background, it is important to explore how data governance impacts bank risk and what factors lead to the significant differences in data governance practices across banks. The study of these questions will have great practical significance for Chinese banks to improve data governance, advance digital transformation and enhance risk prevention capability.
To analyze the above issues, we collect microdata of 198 commercial banks from 2015 to 2022. The paper measures the level of commercial banks' data governance based on the "Guidelines for Data Governance of Banking Financial Institutions". Applying the PSM-DID method, the study explores the impact of data governance on bank risk and its mechanisms, and further examines the synergy effect of data governance and digital transformation on bank risk. The results show that: firstly, data governance significantly reduces bank risk. Secondly, data governance mainly lowers bank risk by improving bank information disclosure quality and bank efficiency. Thirdly, heterogeneous analysis finds that while data governance significantly suppresses risks of larger banks and city commercial banks, it fails to effectively reduce risks of rural commercial banks. Fourthly, data governance and digital transformation exhibit a synergistic effect in mitigating bank risk.
The research offers certain policy implications for improving data governance in commercial banks. First, the financial regulatory authority should encourage banks to actively engage in data governance efforts. Second, banks need to formulate differentiated data governance strategies based on their own digital transformation progress. Third, it is essential to improve the coordination mechanism between data governance and digital transformation.
The study contributes to existing literature in several ways. Firstly, it conducts an in-depth analysis of the impact of data governance on bank risk. This expands the research on the relationship between financial technology development and bank risk. Existing studies mainly focus on the impact of internet finance, financial technology, and digital transformation on bank risk, with few papers analyzing the important role of data governance. Some studies analyzing the effect of data governance are mainly qualitative and lack empirical evidence. Second, the paper examines the synergistic effect of data governance and digital transformation on bank risk. It is known from the practice of data governance in Chinese banks that the data governance capabilities of different banks vary greatly, and digital transformation is an important driver for data governance. Meanwhile, data governance influences the efficiency of digital transformation. Therefore, it is essential to explore the synergy effects of data governance and digital transformation. Third, the study explores the underlying mechanisms about how data governance impacts bank risk. Using data quality as a bridge, it analyzes the channel between data governance and bank risk from novel perspectives of bank information disclosure quality and bank efficiency.
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Received: 21 March 2024
Published: 22 May 2025
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