Research On The Impact Of Credit Rating On The Capital Structure Of China’s Small And Medium Banks

Recently,small and medium-sized banks such as Baoshang Bank and Liaoyang Rural Commercial Bank have gone bankrupt and their credit ratings have been continuously downgraded.The credit risk of small and medium-sized commercial banks has attracted attention.On September 10,2021,the CBRC issued the Measures for the Regulatory Rating of Commercial Banks,which put forward new requirements for the regulatory rating and credit risk management of commercial banks,and clarified the role of credit rating in the process of bank risk prevention.According to the Basel Agreement,large commercial banks can independently supplement capital and adjust capital structure based on internal ratings,while the optimization of capital structure of small and medium-sized commercial banks depends on the results of third-party credit ratings.With the macroeconomic downturn and the continued impact of the COVID-19,the credit risk of small and medium-sized commercial banks will become more severe.Can small and medium-sized commercial banks manage capital and adjust capital structure according to their credit risk level? Does the current capital management of small and medium-sized commercial banks correspond to the risk level presented by their credit ratings? Where is the adjustment mechanism of commercial banks’ capital structure in response to credit rating changes? The discussion of these problems has practical significance.With the research object of rural commercial banks and urban commercial banks with credit rating adjustment,this paper adopts theoretical and empirical research methods to explore the relationship between credit rating changes and capital structure adjustment of commercial banks,so as to reveal the characteristics of capital management and risk management of small and medium-sized commercial banks.First of all,it combed and summarized the credit rating,capital structure and related research literature,providing support for subsequent research.Secondly,based on the trade off theory and the signaling theory,this paper discusses the risk signaling effect of capital structure change and credit rating respectively,reveals the relationship between credit rating level and capital structure of commercial banks from two aspects of external capital supervision and internal risk management of commercial banks,and analyzes the impact mechanism of the relationship.Thirdly,take the small and medium-sized banks with credit rating adjustment from 2015 to 2021 as the research sample,and use the random effect model to empirically test the following assumptions: First,the correlation between the credit rating level and the capital structure level of commercial banks is to observe whether the credit rating level is consistent with the capital structure level as a whole;Secondly,the impact of credit rating changes on bank capital structure changes is to study whether the capital structure of commercial banks responds and adjusts quickly to credit risk;Third,in order to explore the impact mechanism of credit rating on the capital structure of commercial banks,it tests whether the intermediary effect of external regulatory pressure and the asset quality of commercial banks is significant;Fourth,in order to further explore the characteristics of the risk management level of different types of commercial banks,a sub item regression is conducted for the full sample by urban commercial banks and rural commercial banks to test the differences in the adjustment of credit rating changes made by the capital structure of different groups of samples.Finally,the research conclusions and suggestions are put forward.Research conclusions:(1)The full sample benchmark regression results show that the credit rating level is negatively correlated with the asset liability ratio of small and medium-sized banks,indicating that the higher the asset liability ratio of commercial banks is,the greater their credit risk is,and the lower their credit rating level is;(2)The dynamic empirical research shows that when the credit rating changes,the bank capital structure does not adjust in the current period,but lags behind to make corresponding adjustment;And the change of credit rating has a positive correlation with the change of asset liability ratio in the short term and a negative correlation in the long term;(3)The test results of intermediary effect of external regulatory pressure and commercial bank asset quality: First,regulatory pressure has a part of intermediary effect in the impact of credit rating level mechanism,but has intermediary effect in the impact of credit rating level adjustment;Second,the non-performing loan ratio has a masking effect on the impact of credit rating changes on bank capital structure adjustment,indicating that the asset quality of commercial banks may be the impact path of credit rating on capital structure adjustment;(4)There is no difference between the credit rating level and the bank capital structure level in different regions,which are all negatively correlated and consistent with the benchmark regression results.However,there are differences in the impact of credit rating change adjustment.Urban commercial banks show a negative impact,while the empirical study of rural commercial banks does not show a significant impact.The research contribution of this paper has the following three points: First,the innovation of the research object.When the asset quality of commercial banks deteriorates and risks rise,according to the requirements of the regulatory authorities,large commercial banks can supplement capital based on internal ratings,independently and flexibly adjust capital structure and manage credit risks;However,small and medium-sized commercial banks depend on the results of external third-party credit ratings to decide whether to adjust their capital structure.In addition,due to the limitations of their shareholders’ capital strength and risk management technology,it is rare to see whether the capital structure responds to changes in credit ratings.Therefore,it is of unique significance to take urban commercial banks and rural commercial banks as research objects in this paper.Second,the innovation of research scope.The research on the impact of credit rating on corporate capital structure is mostly limited to the direct impact of the relationship between the two.This paper expands the scope of research,introduces regulatory pressure,and tests the intermediary effect of regulatory pressure,thus taking external regulatory pressure and internal asset quality as the observation indicators of capital structure adjustment,enriching the risk evaluation system;Third,the findings are new.The dynamic empirical research shows that when the credit rating changes,the bank capital structure does not adjust in the current period but lags behind to make corresponding adjustment;And the change of credit rating has a positive correlation with the change of asset liability ratio in the short term and a negative correlation in the long term;These research conclusions are rare in the existing literature,which make a useful supplement to the research achievements in this field.