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.
Original language | English |
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Pages (from-to) | 38-49 |
Number of pages | 12 |
Journal | Journal of Financial Stability |
Volume | 40 |
Early online date | 28 Nov 2018 |
DOIs | |
Publication status | Published - Feb 2019 |
Keywords
- banking
- capital
- adjustment speed
- government ownership
- China
- Government ownership
- Adjustment speed
- Banking
- Capital