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Financial inclusion and bank risk-taking nexus: evidence from China

Author

Listed:
  • Muhammad Umar
  • Muhammad Akhtar

Abstract

Purpose - This study aims to investigate the relationship between financial inclusion and risk-taking by Chinese banks. Design/methodology/approach - It uses the panel data from Chinese banks ranging from 2011 to 2019 and applies system generalized method of moments to measure coefficients. To get in-depth understanding of the relationship between above-mentioned variables, the analysis for commercial, cooperative, listed, unlisted, small and large banks has been done. Financial inclusion index has been measured based on demographic and geographic aspects by using the principal component analysis, and bank risk-taking has been proxied byz-score. Findings - The findings reveal an inverse relationship between financial inclusion and bank risk-taking which implies that an increase in financial inclusion results in lesser risk for the banks, i.e. diversification hypothesis applies. However, the results for unlisted and large banks show a different story where an increase in financial inclusion results in higher bank risk and vice versa. Originality/value - The present study offers several valid and convincing implications for consumers, policymakers and banking sector regulators.

Suggested Citation

  • Muhammad Umar & Muhammad Akhtar, 2021. "Financial inclusion and bank risk-taking nexus: evidence from China," China Finance Review International, Emerald Group Publishing Limited, vol. 14(2), pages 352-362, October.
    • Handle: RePEc:eme:cfripp:cfri-08-2021-0174
    DOI: 10.1108/CFRI-08-2021-0174
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    Citations

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    Cited by:

    1. Huang, Yichu & Fang, Feifei & Fan, Yaoyao & Ly, Kim Cuong, 2024. "Do ‘Lehman Sisters’ work in China? Women on boards and bank risk," International Review of Financial Analysis, Elsevier, vol. 93(C).

    More about this item

    Keywords

    Financial inclusion; Bank risk-taking; Collaborative intervention theory; China; G210; G320; O16;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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