Bank’s Regulatory Capital Buffer and Counter-cyclical Behavior – Empirical Analysis Based on China’s 18 Commercial Banks

Jiaqian Liu ()
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Jiaqian Liu: Anhui University of Finance & Economics

International Journal of Management Science and Business Administration, 2016, vol. 2, issue 4, 7-16

Abstract: This paper estimates the relationship between the Chinese business cycle and the regulatory capital buffers of China’s commercial banks, conducts empirical tests by using an unbalanced panel of 18 listed Chinese banks for the period 2005–2014. The results show that in China there is a robustly significant negative relationship between the economic cycle and bank capital buffers. Insignificance of coefficient of the total amount of loans shows that China’s commercial banks holding more capital buffer do not necessarily lead to a “credit crunch” phenomenon. Positive significant asset coefficient indicates the larger the size of the assets, the more inclined for China banks to hold more capital buffers, which is incompatible with “too big to fall” theory. The relationship between the loan loss provisions and capital buffers is not significant and this caused by Chinese commercial bank’s balance between the profit and cost perspective.

Keywords: Chinese commercial banks; Capital buffer; Counter-cyclicality; Bank capital (search for similar items in EconPapers)
JEL-codes: M00 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:mgs:ijmsba:v:2:y:2016:i:4:p:7-16

DOI: 10.18775/ijmsba.1849-5664-5419.2014.24.1001

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