Title

Ownership structure and risk-taking : comparative evidence from private and state-controlled banks in China

Document Type

Journal article

Source Publication

International Review of Financial Analysis

Publication Date

12-1-2014

Volume

36

First Page

120

Last Page

130

Keywords

Bank; Risk-taking; State ownership; Ownership concentration; China

Abstract

This study examines the impact of ownership structure on Chinese banks' risk-taking behaviours. We classify the Chinese commercial banks into three categories based on the types of controlling shareholder, and find that banks controlled by the government (GCBs) tend to take more risks than those controlled by state-owned enterprises (SOECBs) or private investors (PCBs). This is attributed to the severe political intervention and weak incentives to follow prudent bank management practices for GCBs. We also find that the results are more pronounced among banks with concentrated ownership presumably because the large controlling power helps to enhance the monitoring of the management and promotes prudent operating procedures. Our findings have important implications for the ongoing reform in the Chinese banking sector.

DOI

10.1016/j.irfa.2014.03.009

Print ISSN

10575219

E-ISSN

18738079

Publisher Statement

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Full-text Version

Publisher’s Version

Recommended Citation

Dong, Y., Meng, C., Firth, M., & Hou, W. (2014). Ownership structure and risk-taking: Comparative evidence from private and state-controlled banks in China. International Review of Financial Analysis, 36, 120-130. doi: 10.1016/j.irfa.2014.03.009