 Economic growth targets and bank risk exposure: Evidence from ChinaQuanxi Liang, Jinlan Huang, Mingjun Liang and Jingxiang Li Economic Modelling, 2024, vol. 135, issue C Abstract: Managing growth targets to maintain economic growth is a common practice worldwide. Using data of local commercial banks over the period 2003 to 2019, we examine the effect of local economic growth targets on the risk exposure of commercial banks in China. We find that local economic growth targets are positively associated with bank risk exposure. This relationship is more pronounced in (1) state-owned banks and those with executives having stronger promotion incentives, (2) provinces with politicians at critical stages for promotion, lower marketization, and lower growth potential, and (3) periods with bleak economic outlook and greater economic policy uncertainty. We further discuss two possible channels through which growth targets affect bank risk: the credit allocation channel and the credit quality channel. Our study sheds new light on the potential costs associated with local governments’ efforts to stabilize economic growth from the perspective of bank risk exposure. Keywords: Economic growth targets; Bank risk exposure; Commercial bank; Credit allocation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:135:y:2024:i:c:s0264999324000580 DOI: 10.1016/j.econmod.2024.106702 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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