Do Capital Requirements Affect Bank Efficiency? Evidence from China

28 Pages Posted: 30 Nov 2013

See all articles by Pierre Pessarossi

Pierre Pessarossi

French Banking Supervisory Authority - Autorité de Contrôle Prudentiel et de Résolution (ACPR)

Laurent Weill

University of Strasbourg - LaRGE Research Center (Laboratoire de Recherche en Gestion et Economie)

Date Written: November 8, 2013

Abstract

This paper contributes to the debate on the effect of capital requirements on bank efficiency. We study the relation between capital ratio and bank efficiency for Chinese banks over the period 2004−2009, taking advantage of the profound regulatory changes in capital requirements that occurred during this period to measure the exogenous impact of an increase in the capital ratio on banks’ cost efficiency. We find that such an increase has a positive effect on cost efficiency, the size of which depends to an extent on the bank’s ownership type. Our results therefore suggest that capital requirements can improve bank efficiency.

Keywords: bank, capital requirements, efficiency, China

JEL Classification: G21, G28

Suggested Citation

Pessarossi, Pierre and Weill, Laurent, Do Capital Requirements Affect Bank Efficiency? Evidence from China (November 8, 2013). BOFIT Discussion Paper No. 28/2013, Available at SSRN: https://ssrn.com/abstract=2361380 or http://dx.doi.org/10.2139/ssrn.2361380

Pierre Pessarossi

French Banking Supervisory Authority - Autorité de Contrôle Prudentiel et de Résolution (ACPR) ( email )

Paris
France

Laurent Weill (Contact Author)

University of Strasbourg - LaRGE Research Center (Laboratoire de Recherche en Gestion et Economie) ( email )

61 Avenue de la Forêt Noire
F-67085 Strasbourg Cedex
France

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
250
Abstract Views
1,274
Rank
251,814
PlumX Metrics