The Impact of Ownership Concentration on the Bank Risk-taking-Evidence from Chinese Commercial Banks

The Impact of Ownership Concentration on the Bank Risk-taking-Evidence from Chinese Commercial Banks

Li Zhang^1,a, Nan Lin^2,b* Li Li^1,c

(Fuzhou University of International Studies and Trade )

 

Abstract:

This research used the annual data about 128 Chinese commercial banks from 2009 to 2017 to investigate the relationship between the risk-taking and ownership structure that represented by owner identity and ownership concentration. The empirical result demonstrated that the risk-taking behavior of commercial banks could be significantly affected by the ownership identity and ownership concentration. Furthermore, it can be found that SOEs controlled banks, private controlled banks and foreign controlled banks focus on more risk regulations than the government-controlled banks due to the identities of ownership. The GCBs do not have the strong motivation to pursue maximized profit and prudent lending practices which should be focused for the financial regulators for market economy. In addition, the incentive to reduce risks by the SOEs and private controlling shareholders would be more obvious among banks with more concentrated ownership. The results should be meaningful for the enlightenment of policy makers.

 

Keywords: Bank, Risk-taking, Ownership Concentrations, China