Information disclosure and depositor discipline in the Chinese banking sector

Yuliang Wu and Michael Bowe

Journal of International Financial Markets, Institutions and Money, 2012, vol. 22, issue 4, 855-878

Abstract: We investigate the relationship between information disclosure and depositor behaviour in the Chinese banking sector. Specifically, we enquire whether enhanced information disclosure enables investors to more effectively infer a banking institution's risk profile, thereby influencing their deposit decisions. Utilising an unbalanced panel, incorporating financial data from 169 Chinese banks over the 1998–2009 period, we employ generalised-method-of-moments (GMM) estimation procedures to control for potential endogeneity, unobserved heterogeneity, and persistence in the dependent variable. We uncover evidence that: (i) the growth rate of deposits is sensitive to bank fundamentals after controlling for macroeconomic factors, diversity in ownership structure, and government intervention; (ii) a bank publicly disclosing more transparent information in its financial reports, is more likely to experience growth in its deposit base; and (iii) banks characterised by high information transparency, well-capitalised and adopted international accounting standards, are more able to attract funds by offering higher interest rates.

Keywords: Information disclosure, Depositor discipline, Chinese banking (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:22:y:2012:i:4:p:855-878

DOI: 10.1016/j.intfin.2012.05.004

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