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Central bank communication, shadow banking, and bank risk-taking: Theoretical model and PVAR empirical evidence

The rapid development of Chinese shadow banking, which relies on the banking system, significantly impacts nonneutral bank risk-taking. Central bank communication also plays a vital role in risk prevention and mitigation in the banking system in a modern central banking system. To address the issues...

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Detalles Bibliográficos
Autores principales: Zhang, Jing, Chen, Shuai, Liu, Honglei
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Public Library of Science 2022
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9518906/
https://www.ncbi.nlm.nih.gov/pubmed/36170338
http://dx.doi.org/10.1371/journal.pone.0275110
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author Zhang, Jing
Chen, Shuai
Liu, Honglei
author_facet Zhang, Jing
Chen, Shuai
Liu, Honglei
author_sort Zhang, Jing
collection PubMed
description The rapid development of Chinese shadow banking, which relies on the banking system, significantly impacts nonneutral bank risk-taking. Central bank communication also plays a vital role in risk prevention and mitigation in the banking system in a modern central banking system. To address the issues of central bank communication, shadow banking, and bank risk-taking, we construct a new theoretical model that includes shadow banking based on the M-S model. Based on the central bank written communication index measured by the Monetary Policy Implementation Report 2009–2019 and balanced panel data of 35 listed banks, we design an empirical PVAR model. This study finds that central bank communication regarding domestic easing economy and policy positively affects bank risk-taking, while central bank communication and mechanism exists in China. Moreover, the growth rate of shadow banking size also positively encourages bank risk-taking. Furthermore, central bank communication regarding foreign policy is negatively related to bank risk-taking in the robustness test, supporting the above findings. The analysis of equity heterogeneity shows that the positive effect of central bank communication on bank risk-taking in shadow banking is more pronounced in small and medium-sized shareholdings. Further analyzing the economic consequences of central bank communication and shadow banking on bank risk-taking, we find that banks’ risk-taking positively affects their share of noninterest income and total asset size.
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spelling pubmed-95189062022-09-29 Central bank communication, shadow banking, and bank risk-taking: Theoretical model and PVAR empirical evidence Zhang, Jing Chen, Shuai Liu, Honglei PLoS One Research Article The rapid development of Chinese shadow banking, which relies on the banking system, significantly impacts nonneutral bank risk-taking. Central bank communication also plays a vital role in risk prevention and mitigation in the banking system in a modern central banking system. To address the issues of central bank communication, shadow banking, and bank risk-taking, we construct a new theoretical model that includes shadow banking based on the M-S model. Based on the central bank written communication index measured by the Monetary Policy Implementation Report 2009–2019 and balanced panel data of 35 listed banks, we design an empirical PVAR model. This study finds that central bank communication regarding domestic easing economy and policy positively affects bank risk-taking, while central bank communication and mechanism exists in China. Moreover, the growth rate of shadow banking size also positively encourages bank risk-taking. Furthermore, central bank communication regarding foreign policy is negatively related to bank risk-taking in the robustness test, supporting the above findings. The analysis of equity heterogeneity shows that the positive effect of central bank communication on bank risk-taking in shadow banking is more pronounced in small and medium-sized shareholdings. Further analyzing the economic consequences of central bank communication and shadow banking on bank risk-taking, we find that banks’ risk-taking positively affects their share of noninterest income and total asset size. Public Library of Science 2022-09-28 /pmc/articles/PMC9518906/ /pubmed/36170338 http://dx.doi.org/10.1371/journal.pone.0275110 Text en © 2022 Zhang et al https://creativecommons.org/licenses/by/4.0/This is an open access article distributed under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0/) , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
spellingShingle Research Article
Zhang, Jing
Chen, Shuai
Liu, Honglei
Central bank communication, shadow banking, and bank risk-taking: Theoretical model and PVAR empirical evidence
title Central bank communication, shadow banking, and bank risk-taking: Theoretical model and PVAR empirical evidence
title_full Central bank communication, shadow banking, and bank risk-taking: Theoretical model and PVAR empirical evidence
title_fullStr Central bank communication, shadow banking, and bank risk-taking: Theoretical model and PVAR empirical evidence
title_full_unstemmed Central bank communication, shadow banking, and bank risk-taking: Theoretical model and PVAR empirical evidence
title_short Central bank communication, shadow banking, and bank risk-taking: Theoretical model and PVAR empirical evidence
title_sort central bank communication, shadow banking, and bank risk-taking: theoretical model and pvar empirical evidence
topic Research Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9518906/
https://www.ncbi.nlm.nih.gov/pubmed/36170338
http://dx.doi.org/10.1371/journal.pone.0275110
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