Monetary policy, capital regulation and bank risk-taking：Evidence from China

Hai Jiang and Chao Yuan

Journal of Asian Economics, 2022, vol. 82, issue C

Abstract: This paper investigates the monetary policy’s risk-taking channel in China’s banking sector and reveals how capital buffer affects this channel in both theoretical and empirical analyses. We find that well-capitalized banks undertake less risk than those under-capitalized, which is opposite to the empirical evidence from the US. After comparing previous related theories, we point out the pattern of risk-shifting effect in China is different from that in the US. Meanwhile, we provide more substantial comparison between different types of banks. First, in the face of falling interest rates, state-owned commercial banks will undertake more risk than others. Second, the deterring effect of capital on risk varies little between banks. Third, banks short of capital can significantly reduce their risk-taking by replenishing capital through several channels.

Keywords: Risk-taking channel; Capital structure; Capital regulation; Risk-shifting effect (search for similar items in EconPapers)
JEL-codes: E44 E52 G21 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1049007822000689
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:82:y:2022:i:c:s1049007822000689

DOI: 10.1016/j.asieco.2022.101512

Access Statistics for this article

Journal of Asian Economics is currently edited by C. Wiemer

More articles in Journal of Asian Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().