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Information Disclosure and Bank Risk‐Taking under a Partially Implicit Deposit Insurance System: Evidence from China
Author(s) -
Wang Zongrun,
Chen Jiangyan,
Wan Yuanyuan,
Jin Yanbo,
Mazzanti Jared Anthony
Publication year - 2015
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/1467-8462.12114
Subject(s) - china , bailout , deposit insurance , business , government (linguistics) , chinese financial system , bank run , empirical evidence , actuarial science , empirical research , monetary economics , financial system , economics , finance , financial crisis , political science , macroeconomics , linguistics , philosophy , epistemology , market liquidity , law
This article examines the role of information disclosure on bank risk‐taking behaviour in China. The study uses a game theory model to analyse the interaction mechanism between bank risk‐taking behaviour and its information disclosure under China's partially implicit deposit insurance system. It is found that banks that are more likely to receive a government bailout when they are in trouble tend to take excessive risk. In addition, the implicit guarantee weakens the market‐monitoring effect of information disclosure. Using data from 60 commercial banks in China, we find strong empirical support for our findings.