Do different forms of government ownership matter for bank capital behavior? Evidence from China

Chunxia Jiang, Hong Liu and Philip Molyneux ()

Journal of Financial Stability, 2019, vol. 40, issue C, 38-49

Abstract: This study attempts to reconcile the conflicting theoretical predictions regarding how government ownership affects bank capital behaviour. Using a unique Chinese bank dataset over 2006–2015 we find that government-owned banks have higher target capital ratios and adjust these ratios faster compared to private banks, supporting the ‘development/political’ view of the government’s role in banking. This effect is stronger for local government-owned and state enterprise-owned banks than for central government-owned banks. We also find that undercapitalized government-owned banks increase equity while undercapitalized foreign banks contract assets and liabilities as their respective main strategy to adjust their capital ratios.

Keywords: Banking; Capital; Adjustment speed; Government ownership; China (search for similar items in EconPapers)
JEL-codes: C32 G21 G28 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:40:y:2019:i:c:p:38-49

DOI: 10.1016/j.jfs.2018.11.005

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