Cognitive Ability,Risk Appetite And Offshore Financial Development

Offshore financial development is the result of institutional changes,and informal institutions are the basis for the formation and implementation of formal institutions.Because personal cognitive ability may affect the formation of risk appetite,and the collective risk appetite level will form an informal system,further affecting the development of offshore finance,research on cognitive ability,risk appetite and offshore financial development to achieve financial development in China.It is of theoretical and practical significance under the two-way open up policy to guide market managers and investors to form a reasonable risk preference level.Based on the theory of mental model,prospect theory and portfolio theory,this paper proposes the theoretical hypothesis that cognitive ability can influence the formation of risk preference and the level of risk preference can promote the development of offshore finance;then use 44 countries and regions 2001-In 2015,the panel data was constructed into a simultaneous equation model,and the three-stage least squares method was used to empirically test the relationship between cognitive ability differences,risk preference levels and offshore financial development.The following conclusions can be seen:Firstly,risk appetite in offshore financial markets can affect the formulation and implementation of formal institutions as an informal system;Secondly,higher risk appetite levels can improve the government effectiveness and increase of offshore financial management authorities.The participation of the shore financial market promotes the development of offshore finance;Finally,the higher level of cognition can significantly improve the level of local risk appetite,confirming the phenomenon of "smart managers" and "smart investors".This paper provides an institutional financial explanation for understanding the transmission path of risk appetite affecting offshore financial development It also provides empirical evidence for strengthening cognitive ability and managing risk appetite in the context of financial two-way openness to promote offshore financial development.