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

Chunxia Jiang (Corresponding Author), Hong Liu (Corresponding Author), Phil Molyneux (Corresponding Author)

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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 languageEnglish
Pages (from-to)38-49
Number of pages11
JournalJournal of Financial Stability
Volume40
Early online date28 Nov 2018
DOIs
Publication statusPublished - Feb 2019

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Keywords

  • banking
  • capital
  • adjustment speed
  • government ownership
  • China
  • Government ownership
  • Adjustment speed
  • Banking
  • Capital

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)
  • Finance

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