A Study of the Leverage Pro-Cyclical Behavior and Asymmetry of Commercial Banks in China

Autori:

Yiyong WU, Ridong HU

Cod: ISSN: 1583-3410 (print), ISSN: 1584-5397 (electronic)
Dimensiuni: pp. 136-152

How to cite this article:

Wu, Y., Hu, R. (2017). A Study of the Leverage Pro-Cyclical Behavior and Asymmetry of Commercial Banks in China. Revista de Cercetare si Interventie Sociala, 59, 136-152.

Abstract:

The leverage pro-cyclical behavior of commercial banks is one of the important reasons for the burst of the financial crisis in 2008. The microscopic data of commercial banks in China during the period of 2006-2015 was used for the empirical research of the leverage cyclical behavior on commercial banks in China and the affecting factors. Moreover, the asymmetry of the banks’ leverage pro-cyclical behavior during different business cycles was also investigated. The results of this study indicated that, the leverage of the commercial banks in China has apparent pro-cyclical behaviors and foreign capital banks have stronger procyclical behaviors. For the commercial banks in China, enhancing the ROE will reduce the leverage for these commercial banks. A larger LD indicator means the leverage level is enhanced. The influence of the NPL on bank leverage has a higher degree of uncertainty. A positive LIQ coefficient indicates that the liquid ratio changes in the same direction as the bank leverage. When considering the asymmetry of bank leverage, it is found that the increase in bank leverage cases is faster during the economic upturn period. On the other hand, the decrease in bank leverage cases during the economic downturn period is slower. Finally, it is expected to provide the bank industry with some recommendations and references on the back leverage pro-cyclical behavior during different economic cycles.