Capital regulation, regulatory avoidance, and bank systemic risk

IF 7.5 1区经济学 Q1 BUSINESS, FINANCE International Review of Financial Analysis Pub Date : 2025-02-13 DOI:10.1016/j.irfa.2025.104002

Wenlong Miao, Yuxian Ma, Haoran Xu

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Abstract

Capital regulation is a core measure of modern financial regulation, but banks' regulatory avoidance behavior may affect the control effect of capital regulation on systemic risk. This study evaluates the control effect of capital regulation on bank systemic risk from the perspective of regulatory avoidance. We employ sample data from 42 Chinese listed banks from 2013 to 2023. The results reveal that as capital regulatory standards are improved, the impact of capital regulation on bank systemic risk changes from a suppressive effect to an exacerbating effect, and there is a ‘U-shaped’ relationship between the two. This impact is related to regulatory evasion behavior. The higher the capital regulatory standards, the greater the degree of bank regulatory evasion, and the weaker the control effect of capital regulation on bank systemic risk. Furthermore, this study investigates the mechanism by which capital regulation affects bank systemic risk. The results reveal that the cost compensation effect, risk correlation effect, and loss aggravation effect will all positively regulate the impact of capital supervision on bank systemic risk.

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来源期刊

International Review of Financial Analysis BUSINESS, FINANCE-

CiteScore

10.30

自引率

9.80%

发文量

366

期刊介绍： The International Review of Financial Analysis (IRFA) is an impartial refereed journal designed to serve as a platform for high-quality financial research. It welcomes a diverse range of financial research topics and maintains an unbiased selection process. While not limited to U.S.-centric subjects, IRFA, as its title suggests, is open to valuable research contributions from around the world.