Capital price distortion, financial leverage, and credit risk in commercial banks

Baolin Ma, Guiqian He, Jin An, Mengding Li and Guanglin Sun

Finance Research Letters, 2024, vol. 69, issue PB

Abstract: This paper uses panel data from 30 provinces and cities from 2012 to 2022 (excluding Tibet, Hong Kong, Macao, and Taiwan), and empirically examines the impact of capital price distortion and financial leverage on the non-performing loan (NPL) ratio of banks by constructing a dynamic panel system GMM model. The study finds that capital price distortion and financial leverage have a significantly positive impact on the NPL ratio of commercial banks. Increasing the degree of capital price distortion and financial leverage leads to a higher NPL ratio. Further analysis reveals that capital price distortion has a significantly positive impact on financial leverage, while Overcapacity has a significantly negative impact on financial leverage.

Keywords: Capital price distortion; Financial leverage; Overcapacity; Commercial banks; Non-performing loan ratio (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:69:y:2024:i:pb:s1544612324012297

DOI: 10.1016/j.frl.2024.106200

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