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Risk Information Disclosure and Bank Soundness: Does Regulation Matter? Evidence from China

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  • Zongrun Wang
  • Jiangyan Chen
  • Xiaofei Zhao

Abstract

This paper examines the impact of the Regulation for Commercial Bank Capital Management in China on banks’ risk taking and disclosure behavior. We construct a risk disclosure index for Chinese commercial banks around this Regulation and find that compliance with the Regulation through a higher risk disclosure index improves bank soundness. We also find that the component of the risk disclosure index associated with risk compensation is the main driving factor of our findings. Moreover, our results show the effect of the Regulation is much smaller for publicly listed banks, suggesting a substituting regulation effect of the public capital market.

Suggested Citation

  • Zongrun Wang & Jiangyan Chen & Xiaofei Zhao, 2020. "Risk Information Disclosure and Bank Soundness: Does Regulation Matter? Evidence from China," International Review of Finance, International Review of Finance Ltd., vol. 20(4), pages 973-981, December.
    • Handle: RePEc:bla:irvfin:v:20:y:2020:i:4:p:973-981
    DOI: 10.1111/irfi.12244
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    References listed on IDEAS

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    Cited by:

    1. Mies, Michael, 2024. "Bank opacity, systemic risk and financial stability," Journal of Financial Stability, Elsevier, vol. 70(C).
    2. Mies, Michael, 2024. "Empirical research on banks' risk disclosure: Systematic literature review, bibliometric analysis and future research agenda," International Review of Financial Analysis, Elsevier, vol. 95(PA).

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