Research On The Influence Of Monetary Policy On Bank Risk-taking In China

The subprime Crisis happened in 2007 caused a world-wide financial crisis. Both governments and academia reflected seriously hereafter. Some scholars pointed out that excessive risk-taking of financial institutions might constitute an important reason of the outbreak this crisis. Therefore, which factors affect excessive risk-taking behavior of financial institutions? Accordingly, from the angle of monetary policy, research regarding risk-taking of financial institutions has been proposed and drawn broad attention soon. Because of the important position occupied by bank industry, current research is usually conducted from the perspective of bank industry.First, this article elaborates pertinent theories of monetary policy’s influence on risk-taking behavior of banks. Second, through the analyses of Chinese monetary policy’s implement environment and practice situation, and the current developing situation of bank industry, this article, in theory, analyzes how Chinese monetary policy affects banks’ risk-taking. Simultaneously, based on micro data of 34 commercial banks during 2004-2013, adopting the estimation methodologies of static and dynamic panel data, this article verifies the effects of monetary policy on banks’ risk-taking from the empirical point of view. The empirical results show that there is a significant negative correlation relationship between the monetary policy and banks’ risk-taking variables; banks’ risk-taking is also affected by its own characteristics: the larger asset size, the more adequate capital, and the stronger profitability of banks may offset the effect of monetary policy on banks’ risk-taking. In addition, the macro-economic environment and the market structure of bank industry will reinforce the impact of monetary policy on banks’ risk-taking. Finally, based on the conclusion of the study, this paper puts forward relevant policy suggestions.