An Empirical Study On Bank Risk And Market Degree

This article aim’s to analyze the relationship between the progress of the marketand commercial banks’ risk-taking based on a sample of16commcrcial banks’2001-2010data in China. In this paper, we use the Z-score to measure banks’risk.The Z-score is equal to the sum of the banks’ return on assets (ROA)and thecapital adequacy ratio(CAR) then divided by the standard deviation of the yieldof bank assets o (ROA).By the definition we can see， the higher ofbanks’Z-score, the lower of the banks’ risk. Measure of the level of the marketwe use Fan Gang and Wang Xiaol’us market index defined in “The Chinesemarket indexreport”，2010.As for the sample， it includes16commercialbanks. We ifrst investigate their relations between bank’s risk-taking (Z-score)and market level.Second, we investigate the channels which influence bankrisk taking, such as the relations between bank loans and the level of market.Also we further investigate the relation between each part of bank Z-score (wecan disaggregate bank Z-score into three parts) and the level of market.According to Fan Gang’s description the market index include Five parts. Inorder to find how the market level affect the banks’ risk, we also use the fiveparts to regress with Z-score.In general, in the past decade, with the advancement of marketization, bank riskis gradually reduced, hut this does not mean that the higher the degree ofma’rketization, the lower the banks risk will, it just reflects a period the risksituation of listed commercial Banks in our country,during this period, the bankcredit scale is not the main factors influencing the bank’s risk, along with the advancement of marketization process, product market gradually improve, therapid development of non-state economy, emerged a large number ofhigh-quality companies, in the case of no significant expansion of bank credit,improve the quality of the bank credit, at the same time, the financial industrycompetition intensifies，make Banks to establish a more pcrfect credit ratingsystem, better risk control system, higher efficiency, and promote the benigndevelopment of credit assets，increase the Banks’ earnings at the same time，reduce the Banks’ earnings volatility, this is the main reason for the decline inBanks’ risk over the past ten years.