Are banks rewarded for financial consumer protection? Evidence from a quasi-natural experiment

Ailian Zhang, Shuyao Wang, Donald Lien and Yu, Chia-Feng (Jeffrey)

Finance Research Letters, 2023, vol. 52, issue C

Abstract: We investigate whether banks benefit from financial consumer protection. Exploiting the difference-in-differences approach based on a policy mandated for Chinese banks and entropy balancing matched sample, we document an increase in non-performing loans and a decrease in total income following the implementation of the policy for opaque banks relative to transparent banks. Decomposition exhibits a decrease in interest income and an increase in non-interest income. The effect is more pronounced for banks with higher ex-ante profits. Our results suggest that financial consumer protection benefits opaque banks’ non-traditional business but harms their traditional business, especially for those with larger customer bases.

Keywords: Financial consumer protection; Non-performing loan; Interest and non-interest income; Chinese banks (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:52:y:2023:i:c:s1544612322007553

DOI: 10.1016/j.frl.2022.103579

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