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How Do Short-Term Cross-Border Capital Flows Affect Bank Risk-Taking? Evidence from China

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  • Rui Chen
  • Jinye Li

Abstract

This study examines the impact of short-term cross-border capital flows on banks’ risk-taking using panel quarterly data from all 37 A-share listed commercial banks in China. We demonstrate that short-term cross-border capital flows increase both ex ante and ex post risk-taking by banks. The impact of short-term cross-border capital flows upon banks’ ex ante and ex post risk-taking is heterogeneous across different kinds of commercial banks and at different phases of the financial cycle. Besides, short-term cross-border capital flows exhibit a non-linear effect on banks’ ex ante risk-taking and ex post risk-taking with changes in capital account openness.

Suggested Citation

  • Rui Chen & Jinye Li, 2024. "How Do Short-Term Cross-Border Capital Flows Affect Bank Risk-Taking? Evidence from China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 60(5), pages 1064-1076, April.
    • Handle: RePEc:mes:emfitr:v:60:y:2024:i:5:p:1064-1076
    DOI: 10.1080/1540496X.2023.2267739
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