Do different forms of government ownership matter for bank capital behavior? Evidence from China

Chunxia Jiang* (Corresponding Author), Hong Liu* (Corresponding Author), Phil Molyneux* (Corresponding Author)

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

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This study attempts to reconcile the conflicting theoretical predictions regarding how government ownership affects bank capital behaviour. Using a unique Chinese bank dataset over 2006-2015 we find that government-owned banks have higher target capital ratios and adjust these ratios faster compared to private banks, supporting the ‘development/political’ view of the government’s role in banking. This effect is stronger for local government-owned and state enterprise-owned banks than for central government-owned banks. We also find that undercapitalized government-owned banks increase equity while undercapitalized foreign banks contract assets and liabilities as their respective main strategy to adjust their capital ratios.
Original languageEnglish
Pages (from-to)38-49
Number of pages12
JournalJournal of Financial Stability
Early online date28 Nov 2018
Publication statusPublished - Feb 2019

Bibliographical note

We are grateful for comments from Iftekhar Hasan (the Editor), three anonymous referees, Kose John, Bill Francis, and participants at various seminars, the IFABS Barcelona Conference (2016), and Wolpertinger Conference Santander (2017). All errors and omissions are of course the responsibility of the authors. This research is financially supported by National Natural Science Foundation of China (No.:


  • banking
  • capital
  • adjustment speed
  • government ownership
  • China
  • Government ownership
  • Adjustment speed
  • Banking
  • Capital


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