Supervisory independence and bank risk: Evidence from China

Pin Guo, Zhao Zhang, Ling Ling and Zhongyu Cao

Research in International Business and Finance, 2025, vol. 79, issue C

Abstract: This study explores the causal effect of supervisory independence on bank risk. Exploiting the merger of the China Banking Regulatory Commission (CBRC) and the China Insurance Regulatory Commission (CRIC) in 2018 as a shock to supervisory independence, we find that increased supervisory independence is significantly associated with reduced bank capital risk, credit risk, and liquidity risk. These effects are particularly prominent for unlisted banks, high-risk banks, and banks headquartered in cities with lower economic growth or fiscal deficit. We further find that supervisory independence strengthens banking stability without compromising asset growth, credit provision, profitability, and operational efficiency.

Keywords: Supervisory independence; Bank risk; Chinese commercial banks (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:79:y:2025:i:c:s027553192500296x

DOI: 10.1016/j.ribaf.2025.103040

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