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Deposit insurance system and commercial bank profitability: A quasi-natural experiment based on the deposit insurance regulations

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  • Ni, Tingting
  • Ren, Yi
  • Choi, Junghwan

Abstract

This article examines the profitability of commercial banks in China, specifically focusing on the impact and processes of the deposit insurance system on banks` profitability. The consequences and underlying mechanisms are explored using a difference-in-difference model based on financial data from listed banks in China from 2007 to 2022. The findings indicate that implementing the deposit insurance regulation can promote commercial bank profitability. The positive effects are achieved by enhancing their risk-taking, liquidity, and growth ability. The findings is conducive to enhance the banking industry's growth and improve the financial services provided to the real economy.

Suggested Citation

  • Ni, Tingting & Ren, Yi & Choi, Junghwan, 2024. "Deposit insurance system and commercial bank profitability: A quasi-natural experiment based on the deposit insurance regulations," Finance Research Letters, Elsevier, vol. 67(PA).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324007931
    DOI: 10.1016/j.frl.2024.105763
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    References listed on IDEAS

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    5. Stella Suljić Nikolaj & Bojana Olgić Draženović & Vesna Buterin, 2022. "Deposit insurance, banking stability and banking indicators," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 35(1), pages 5632-5649, December.
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