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Do capital requirements affect bank efficiency? Evidence from China

Listed author(s):
  • Pessarossi, Pierre
  • Weill, Laurent

This paper contributes to the debate on the effect of capital requirements on bank effieciency. 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 in-crease 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. JEL Codes: G21, G28 Keywords: bank, capital requirements, efficiency, China

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Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 28/2013.

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Date of creation: 20 Nov 2013
Publication status: Published in Published in Revue économique 3/2015 (Vol. 66) , p. 505-520 as Les exigences de fonds propres influencent-elles l’efficience des banques? Leçons d'une expérience naturelle en Chine. http://www.cairn.info/revue-economique-2015-3-page-505.htm
Handle: RePEc:bof:bofitp:2013_028
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