BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 28/2013:
Do capital requirements affect bank efficiency? Evidence from China
Pierre Pessarossi ()
and Laurent Weill ()
Abstract: This paper contributes to the debate on the effect of
capital requirements on bank efficiency. We study the relation between
capital ratio and bank efficiency for Chinese banks over the period
2004-2009, taking advantage of the profound regulatory changes in capital
requirements that occurred during this period to measure the exogenous
impact of an in-crease in the capital ratio on banks’ cost efficiency. We
find that such an increase has a positive effect on cost efficiency, the
size of which depends to an extent on the bank’s ownership type. Our
results therefore suggest that capital requirements can improve bank
efficiency.
Keywords: bank; capital requirements; efficiency; China; (follow links to similar papers)
JEL-Codes: G21; G28; (follow links to similar papers)
28 pages, November 8, 2013
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