Regulatory arbitrage, bank opacity and risk taking in Chinese shadow banking from the perspective of wealth management products
Bibliographic Data
| ID | 6045462 |
|---|---|
| Authors | Yeni Huang (People's Bank of China), Bian Zhou (0000-0002-9815-028X, Bank of China, corresponding author), Liya Liu (0000-0001-9105-9603, Shanghai University of Finance and Economics) |
| Year | 2022 |
| Volume | 2 |
| Issue | 1 |
| Pages | 1-14 |
| Publication date | 2022-03-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | China Economic Quarterly International (JOURNAL) |
| Journal identifiers | ISSN: 2666-9331 • E-ISSN: 2666-9331 |
| Publisher | Elsevier BV (PUBLISHER) |
| DOI | 10.1016/j.ceqi.2021.12.001 |
| OpenAlex | W4206585565 |
| Language | EN |
| References cited | 7 |
We set up a general equilibrium model of Chinese wealth management products (WMPs), which are deeply rooted in traditional Chinese commercial banks. According to this model, we proposed two hypotheses, namely, the regulatory arbitrage and information asymmetry hypotheses. We tested the hypotheses by using data on Chinese WMPs during the 2006–2015 period. We found that regulatory arbitrage was the main driver of WMPs’ rapid expansion. The greater the pressure from regulation was, the greater the incentive for commercial banks to issue off-balance sheet WMPs and take risks. When the regulatory standard became strict or loose, the effect of regulatory arbitrage on marginal risk-taking behavior became reinforced or reduced, respectively. We also argue that transparency can moderate drive-up behavior. Some relevant suggestions are provided for solving the problems of overexpansion and risk-taking behavior according to the results
Actuarial science · Arbitrage · Business · Economics · Financial economics · Incentive · Microeconomics · Monetary economics · Risk management · Banking stability, regulation, efficiency · Computer Science · Financial Markets and Investment Strategies · Housing Market and Economics · Finance
| Citation velocity | historical |
|---|---|
| Highly cited | No |