scholarly journals Economic Fluctuation, Local Government Bond Risk and Risk-Taking of City Commercial Banks

2021 ◽  
Vol 13 (17) ◽  
pp. 9871
Author(s):  
Changjun Zheng ◽  
Shiying Chen ◽  
Zhenhuan Dong
Keyword(s):  
Local Government ◽  
Risk Taking ◽  
Commercial Banks ◽  
Banking Sector ◽  
Government Debt ◽  
Bank Risk ◽  
Government Bond ◽  
Economic Fluctuation ◽  
Bond Risk ◽  
The Impact

Countercyclical fiscal regulation can mitigate economic risk, but this is bound to increase the scale of local government debt during an economic downturn, and then spread risk to the banking sector, forming potential financial instability factors. We extracted the three most important variables in this process: economic fluctuation, local debt risk and bank risk-taking to build an econometric model and found that: (1) both economic fluctuations and local government bond risks have a significant impact on bank risk-taking, which is negatively correlated with local economic growth, while the increase of local government bond risks tends to increase bank risk-taking in the long run; (2) the impact of local government debt risk significantly increases the loans of city commercial banks flowing into the construction industry. Therefore, the impact of local government bond risk on city commercial banks is concentrated in the impact on their construction loans. This study has an important reference value for timely and moderate countercyclical regulation, preventing local debt risk from spreading to banks, constructing a sustainable local government−bank ecology, and promoting sustainable economic development.

Capital regulation and ownership structure on bank risk

2019 ◽  
Vol 28 (1) ◽  
pp. 39-56 ◽  
Author(s):  
Aysa Siddika ◽  
Razali Haron
Keyword(s):  
Maximum Likelihood ◽  
Ownership Structure ◽  
Risk Taking ◽  
Commercial Banks ◽  
Dynamic Panel Data ◽  
Bank Risk ◽  
Capital Regulation ◽  
Content Type ◽  
Global Banking ◽  
The Impact

Purpose This paper aims to examine the impact of capital regulation, ownership structure and the degree of ownership concentration on the risk of commercial banks. Design/methodology/approach This study uses a sample of 565 commercial banks from 52 countries over the period of 2011-2015. A dynamic panel data model estimation using the maximum likelihood with structural equation modelling (SEM) was followed considering the panel nature of this study. Findings The study found that the increase of capital ratio decreases bank risk and the regulatory pressure increases the risk-taking of the bank. No statistically significant relationship between banks’ ownership structure and risk-taking was found. The concentration of ownership was found negatively associated with bank risk. Finally, the study found that in the long term, bank increases the capital level that decreases the default risk. Originality/value This study presents an empirical analysis on the global banking system focusing on the Basel Committee member and non-member countries that reflect the implementation of Basel II and Basel III. Therefore, it helps fill the gap in the banking literature on the effect of recent changes in the capital regulation on bank risk. Maximum likelihood with SEM addresses the issue of endogeneity, efficiency and time-invariant variables. Moreover, this study measures the risk by different proxy variables that address total, default and liquidity risks of the banks. Examining from a different perspective of risk makes the study more robust.

scholarly journals The Impact of Cross-Border Capital Flows on the Chinese Banking System

SAGE Open ◽  
2021 ◽  
Vol 11 (2) ◽  
pp. 215824402110214
Author(s):  
Yang Zhao ◽  
Zichun Xu
Keyword(s):  
Risk Taking ◽  
Capital Flows ◽  
Commercial Banks ◽  
Generalized Method Of Moments ◽  
Bank Risk ◽  
Capital Account ◽  
Political Condition ◽  
Positive Effects ◽  
Cross Border ◽  
The Impact

With the accelerated opening of China’s capital account, China’s banking sector is exposed to the impacts of cross-border capital flows. This article explores the impact of cross-border capital flows on banks’ risk-taking in China. Employing bank-level data of 50 Chinese commercial banks from 2005 to 2018 and a sys-GMM (system generalized method of moments) estimation method, we show that cross-border capital flows are positively associated with the risk-taking of Chinese commercial banks. Moreover, banks that are larger, more capital adequate, and more profitable are more sensitive to the degree of capital account openness toward risk-taking, and the capital account openness has the greatest influence on the profitability-driven bank risk-taking. Nevertheless, such positive effects of capital account openness on bank risk-taking may be weakened under bad macro-environment, indicated by low economic growth, poor legitimate law enforcement, and unstable political condition.

scholarly journals Impact of ownership structure on default risk: a case of banking sector of Pakistan

2014 ◽  
Vol 11 (2) ◽  
pp. 144-152 ◽  
Author(s):  
Khadija Ashfaq ◽  
Zahid Irshad Younas ◽  
Bilal Mehmood
Keyword(s):  
Financial Institutions ◽  
Ownership Structure ◽  
Risk Taking ◽  
Commercial Banks ◽  
Default Risk ◽  
Banking Sector ◽  
Two Dimensions ◽  
Ownership Concentration ◽  
Significant Relation ◽  
The Impact

This study empirically investigates the impact of ownership structure on default risk of banks by using the panel data of commercial banks of Pakistan over the period of 2005-2011. The study considers two dimensions of ownership structure: categories of owners and ownership concentration. The study further splits the categories of owners into seven categories (managers/directors, families/individuals, foreigners, public owners, banks, non-banking financial institutions, and non-financial institutions), having different risk taking incentives. Controlling for various factors, the results of the study reveal that the ownership structure is significantly related with default risk of banks. On the whole, higher equity stake families/individuals are associated with a decrease in default risk of banks. Also, the involvement of public owners and foreign owners in ownership structure seem to increase the default risk of banks. All other categories do not have significant relation with default risk of banks. Finally, the findings of the study suggest that high ownership concentration is associated with high default risk in banks.

scholarly journals How Do Bank Capital and Capital Buffer Affect Risk: Empirical Evidence from Large US Commercial Banks

2021 ◽  
Vol 10 (2) ◽  
pp. 109-131
Author(s):  
Faisal Abbas ◽  
Zahid Irshad Younas
Keyword(s):  
Risk Taking ◽  
Commercial Banks ◽  
Banking Sector ◽  
Negative Impact ◽  
Positive Influence ◽  
Bank Risk ◽  
Bank Capital ◽  
Total Risk ◽  
Asset Risk ◽  
The Relationship

Abstract This research aims to investigate the influence of bank capital, risk-based capital and bank capital buffers on the behaviour of bank risk-taking by applying GMM on the data of US commercial banks ranges from 2002 to 2018. The findings show that bank capital has a positive influence on total risk. However, risk-based capital and capital buffer have a negative impact on total risk. In addition, the results showed that the relationship between bank asset risk and bank capital, risk-based capital and a capital buffer is negative in pre, amid and post-crisis periods. The findings also reveal that the result of bank capital, risk-based capital and a capital buffer is not similar in case of well, adequately, under, significantly under, and critically undercapitalized banks. Our conclusions have numerous implications for policymakers and regulators in the banking sector.

scholarly journals Does the target market affect bank performance? Evidence from the geographic diversification of city commercial banks in China

2021 ◽  
Vol 15 (1) ◽  
Author(s):  
Xiaonan Li ◽  
Chang Song
Keyword(s):  
Commercial Banks ◽  
Banking Sector ◽  
Capital Adequacy ◽  
Bank Performance ◽  
Chinese Government ◽  
Target Market ◽  
Geographic Diversification ◽  
Cross Sectional ◽  
The Impact ◽  
Geographical Diversification

AbstractAfter the opening up of the banking sector to domestic and foreign capitals which is approved by the Chinese government, the China Banking Regulatory Commission (CBRC) has permitted city commercial banks to diversify geographically. Since this deregulation in 2006, city commercial banks began to geographically diversify to occupy the market and acquire more financial resources. To examine the causal relationship between geographical diversification and bank performance, we construct an exogenous geographical diversification instrument using the gravity-deregulation model and a policy shock. We find that bank geographical diversification negatively affects bank performance. Moreover, we conduct some mechanism tests in the Chinese context. We find that the target market with several large- and medium-sized banks and a high level of local protectionism in the target market decreases the performance of city commercial banks. Finally, cross-sectional analyses show that the impact of geographical diversification on banks’ performance is more notable among city commercial banks that are younger, and have a lower capital adequacy ratio and a higher non-performing loan ratio.

scholarly journals Examining banking productivity drivers in MENA banks after financial liberalisation in 1990s

2019 ◽  
Vol 8 (1) ◽  
pp. 59-74
Author(s):  
Hatem Elfeituri
Keyword(s):  
Commercial Banks ◽  
Technological Progress ◽  
Banking Sector ◽  
State Ownership ◽  
Scale Efficiency ◽  
Efficiency Change ◽  
Mena Countries ◽  
Financial Liberalisation ◽  
The Impact ◽  
Banking Productivity

The paper investigates whether deregulation and economic reforms have transformed the MENA banking sector into a more productive and efficient sector. This is the first study to cover a large sample of 11 MENA countries for an extended and recent period (1999-2012). Initially, this paper estimates the productivity and efficiency of MENA commercial banks using Malmquist DEA to estimate productivity (TFP), technological and technical efficiency, and scale efficiency change in order to investigate to what extent banking productivity in MENA economies has improved during the study period. Then, Tobit model is employed to examine the impact of bank and macroeconomic variables on the total factor productivity of MENA commercial banks. The obtained MPI results suggest that commercial banks operating in the Gulf countries have exhibited productivity progress mostly due to the technological progress rather than efficiency change. Results also suggest that expenses preference behaviour would help banks to enhance their productivity in the examined period and MENA countries. Whilst banking productivity is improved by financial reforms and technological progress, such findings overall do not indicate that foreign participation or state ownership lead to enhance productivity of banks, whilst suggesting that a number of sound policies should be implemented taking into account the characteristics of banking sector in MENA countries.

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