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Does local government debt regulation improve rural banks’ performance? Evidence from China

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  • Jing, Zhongbo
  • Liu, Wei
  • Wang, Zexi
  • Wei, Lu
  • Zhang, Xuan

Abstract

This study offers a new approach to measure the intensity of local government debt regulations using textual analysis. Based on a sample of 71 rural banks in 21 Chinese provinces from 2013 to 2019, we investigate the impact of the number and proportion of keywords in local debt-related documents on rural banks’ performance. Results show that an increase in debt regulation improves banks’ performance by reducing local government debt. Moreover, an increase in the proportion of government shareholdings in rural banks as well as fiscal pressure weaken this impact; an increase in economic development pressure strengthens this impact.

Suggested Citation

  • Jing, Zhongbo & Liu, Wei & Wang, Zexi & Wei, Lu & Zhang, Xuan, 2024. "Does local government debt regulation improve rural banks’ performance? Evidence from China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:intfin:v:91:y:2024:i:c:s1042443123001828
    DOI: 10.1016/j.intfin.2023.101914
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    Keywords

    Local government debt regulation; Rural commercial bank; Financial performance; Text analysis;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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