{"title":"Explicit deposit insurance, active risk taking, and bank efficiency in China","authors":"Ning Ding , Lei Xu , Xiao Wu , Zixuan Dai","doi":"10.1016/j.irfa.2025.104139","DOIUrl":null,"url":null,"abstract":"<div><div>China, the largest bank-based economy, has raised concerns that its explicit deposit insurance system (DIS) may substantially increase risky assets. We examine the impact of DIS on bank efficiency from the perspective of active risk-taking. Through panel data from 107 Chinese banks from 2009 to 2020, we find explicit DIS decreases bank efficiency by boosting active risk-taking, and such a link exhibits a U-shaped pattern. Furthermore, credit risk management capabilities, capital adequacy levels, and bank franchise values can act as crucial mitigating factors, which in turn alleviate the negative effects of DIS on bank efficiency.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"102 ","pages":"Article 104139"},"PeriodicalIF":9.8000,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Review of Financial Analysis","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1057521925002261","RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"2025/3/11 0:00:00","PubModel":"Epub","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
China, the largest bank-based economy, has raised concerns that its explicit deposit insurance system (DIS) may substantially increase risky assets. We examine the impact of DIS on bank efficiency from the perspective of active risk-taking. Through panel data from 107 Chinese banks from 2009 to 2020, we find explicit DIS decreases bank efficiency by boosting active risk-taking, and such a link exhibits a U-shaped pattern. Furthermore, credit risk management capabilities, capital adequacy levels, and bank franchise values can act as crucial mitigating factors, which in turn alleviate the negative effects of DIS on bank efficiency.
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.
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