1 / 10

Risk-taking behavior and bank charter value of listed banks: An empirical study in China

Risk-taking behavior and bank charter value of listed banks: An empirical study in China. Yanping Li , Liyan Han School of Economics & management, Beihang University,Beijing,100083,China E-mail address: happyping123@163.com. Introduction.

aurora-mcdowell
Download Presentation

Risk-taking behavior and bank charter value of listed banks: An empirical study in China

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Risk-taking behavior and bank charter value of listed banks:An empirical study in China Yanping Li , Liyan Han School of Economics & management, Beihang University,Beijing,100083,China E-mail address:happyping123@163.com

  2. Introduction • Identifying and measuring banks’ risk-taking behaviors are crucial to build finance safety nets. • Risk-taking behaviors exhibit mainly in banks’ moral hazard in their asset portfolio. • Bank charter value is the most important element lured banks into excessive adventure.

  3. Related literature • Bank charter value rests with the market power（Keeley，1990）, reputation（Boot and Greenhaum，1993）as well as the relationship between banks and their clients（Besanko and Thakor，1993) • Merton(1977) discovers the relationship between deposit insurance and a put option（Marcus，1984；Furlong and Keeley，1989；Keeley,1990） • Many studies have tested the regulation effects (Kahane,1977;Bhattacharya and Thakor，1993; Buser et al,1981; Sangkyun Park,1997) • Some studies are involved in the mechanism of bank charter value acting on bank risk-taking behaviors(Dewatripont and Tirole,1993; Dale and Lee,2001;Barth et al.2001，2004; Francisco. Gonzalez,2005 )

  4. Data, variables and methodology • Data source: CSMAR series data base supplied by Shenzhen GTA information and technology limited company. • Samples: all the five listed banks in china stock exchange . • Time: from 1999 to 2005

  5. Variables

  6. Model • The initial model is set as following: • The final model form is set as following:

  7. Empirical results

  8. Conclusions • L/TA and LNA have negative relationship with bank charter value. • The subtractive coefficient of L/TA suggests that the riskier the banks are, the lower their charter values are, and vice versa. • The relationship between bank size and charter value is a quadratic equation and its form should be U-shaped. • The action of L/E and L/TA on banking operations varies across the time and they have the identical impact on all the five banks at a certain time. • Different listed time results in the different regression result between Huaxia bank and other banks.

  9. Summary and policy implication • We find that the relationship between bank asset and charter value is a quadratic equation and its form should be U-shaped. • We expect the government to retreat from the economy from many fields since bank charter value can not represent the bank’s market reputation and its future prospect completely. • Expanding the banks by increasing their asset is a viable means of strengthening their ability to fight back risk.

  10. References • Buser，Sa, Ah，Chen and E.J.Kane.，1981. Federal deposit，regulatory policy and optimal bank capital. Journal of Finance 36，51－60 • Dale K. Osborne and Seokwon Lee., 2001, Effects of deposit insurance reform on moral hazard in US banking. Journal of Business and Accounting 28(7), 979-992 • Francisco.Gonzalez., 2005, Bank regulation and risk-taking incentives: An international comparison of bank risk. Journal of Banking and Finance 29, 1153-1184 • Furlong，F.T. and M.C. Keeley.，1989，Capital regulation and bank risk－taking：A note. Journal of Banking and Finance 13，883－891 • Kahane，M.C., 1977，Capital adequacy and the regulation of financial intermediaries. Journal of Banking and Finance 1，207－218 • Linda Allen and Anoop Rai., 2005, Bank charter value and capital level：An international comparison. Journal of Economics and Business 48:269-284 • Marcus，A.，1984, Deregulation and bank financial policy. Journal of Banking and Finance 8, 557－565 • Merton，R.C.，1977，An analytic derivation of the cost of deposit insurance and loan guarantees. Journal of Banking and Finance 1，3－11 • Rithchken P.J.B，Thomson，R.P. DeGennaro and A Li., 1993, On flexibility，capital structure and investment decisions for insured banks. Journal of Banking and Finance 17，1133－1146 • Sankarshan Acharya，1996, Charter value, minimum bank capital requirement and deposit insurance pricing in equilibrium. The Journal of Banking and Finance 20, 351-375 • Sangkyun Park.,1997, Risk－taking behavior of banks under regulation, Journal of Banking and Finance 21, 491－507 • Yuk－Shee Chan, Stuart I. Green Bamn, and Anjan V. Thakor., 1992, Is fairly priced deposit insurance deposit insurance possible？The Journal of Finance 1, 227-245

More Related