The Influence of Chinese Commercial Banks’ Leverage Ratio on Systemic Financial Risk

Chun-yan LIN, Tan LI

Abstract


Based on panel data model and the classification of Chinese commercial banks, this paper established a two-way fixed effect model, and empirically analyzes the relationship between leverage ratio and financial risk of the five common types of banks in China. The results show that leverage ratio is the main index that affects the steady development of Chinese commercial banks, and the high leverage ratio will lead to high financial risk. This paper holds that, in the future, we should pay more attention to the development of leverage ratio. On this basis, the main regulatory indicators should be adjusted according to the characteristics of banks. It is of great significance to control financial risks and maintain the stable operation of financial market.

Keywords


Leverage ratio, Financial risk, Commercial bank, Two-way fixed effect model


DOI
10.12783/dtssehs/eelss2020/34646

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