Information Disclosure, Market Discipline and the Management of Bank Capital: Evidence from the Chinese Financial Sector

Yuliang Wu, Michael Bowe

Research output: Contribution to journalArticlepeer-review

7 Citations (Scopus)

Abstract

Is there evidence that market forces effectively discipline risk management behaviour within Chinese financial institutions? This study analyses information from a comprehensive sample of Chinese banks over the 1998-2008 period. Market discipline is captured through the impact of four sets of factors namely, market concentration, interbank deposits, information disclosure, and ownership structure. We find some evidence of a market disciplining effect in that: (i) higher (lower) levels of market concentration lead banks to operate with a lower (higher) capital buffer; (ii) joint-equity banks that disclose more information to the public maintain larger capital ratios; (iii) full state ownership reduces the sensitivity of changes in a bank's capital buffer to its level of risk;(iv) banks that release more transparent financial information hold more capital against their non-performing loans. © 2010 Springer Science+Business Media, LLC.
Original languageEnglish
Pages (from-to)159-186
Number of pages28
JournalJournal of Financial Services Research
Volume38
Issue number2
DOIs
Publication statusPublished - Dec 2010

ASJC Scopus subject areas

  • Accounting
  • Economics and Econometrics
  • Finance

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