Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212802 
Year of Publication: 
2014
Series/Report no.: 
BOFIT Discussion Papers No. 16/2014
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
Abstract: 
We investigate ownership effects on capital and adjustments speed to the target capital ratio in China from 2000 to 2012 and find that state-owned banks hold higher levels of capital than banks of other ownership types. Foreign banks are more highly capitalized than local non-state banks but under-capitalized compared with the bigger non-state banks with nationwide presence. Foreign banks adjust risk-weighted capital towards their optimal targets at a slower speed than domestic banks, while foreign minority ownership results in a faster adjustment process. Capital is positively influenced by profitability, asset diversification and liquidity risk, but negatively influenced by bank market power. Capital ratios typically co-move with the business cycle although this relationship is reversed during the crisis period due to active government intervention. Our results are robust to various modelling specifications and have important policy implications. Publication
Subjects: 
banking
capital
adjustment
ownership
China
JEL: 
G21
G28
C32
Persistent Identifier of the first edition: 
ISBN: 
978-952-6699-97-4
Document Type: 
Working Paper

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