OWNERSHIP CONCENTRATION, EXTERNAL GOVERNANCE AND BANKS’ CAPITAL BUFFERS – International Journal of Social Sciences and Management Review

OWNERSHIP CONCENTRATION, EXTERNAL GOVERNANCE AND BANKS’ CAPITAL BUFFERS

Author: Shehong Hou

ABSTRACT

We investigate the effect of banks ownership on capital buffers while there exists interaction between ownership and external governances with a method of System GMM for China banks. We find that the increase of ownership concentration can promote the increase of capital buffers, while government’s implicit guarantee and lower ratio of interbank deposits may moderate this effect. The robustness test by excluding the 5 largest nation-owned banks support our finding. Strengthen the market-oriented reform in Chinese banks, adequately increase the ratio of large shareholders, accelerate the development of interbank market and reduce government implicit guarantees can promote Chinese banks stability.

Keywords: banks’ ownership, external governance, capital buffers, System GMM

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