Research On The Impact Of Foreign Capital Bank’s Entry On Bank Risk-taking Of Chinese Commercial Bank

In recent years,under the combined influence of a variety of domestic and foreign factors,such as shifting economic fluctuations,rising policy uncertainty,deteriorating global trade environment and increasingly fierce voices against globalization,the Chinese economy has been under increasing downward pressure and the accumulation of financial risks.Under the trend of economic globalization and financial liberalization,financial opening has provided an opportunity for many emerging market countries to reform their financial systems.As an important part of the financial opening strategy,whether foreign banks can activate our financial market and enhance the stability of the banking system has aroused extensive attention of the academic community.As the forerunner of the reform of the financial system,the risk bearing capacity of commercial banks plays an important role in preventing and defusing systemic financial risks.In view of this,in the context of financial opening up,whether foreign banks can reduce bank risks to maintain financial stability and promote high-quality development of the real economy has become a key issue that needs to be urgently solved.Based on the sample of 141 commercial banks from 2013 to 2021,this paper systematically explores the influence of foreign banks’ entry into Chinese commercial banks’ risk taking,and examines the difference of risk effect of foreign banks’ entry into Chinese commercial banks from three aspects: active risk,passive risk and overall risk taking.This paper focuses on the heterogeneity of banks’ liquidity level,profitability,asset scale,capital adequacy ratio and nature,and focuses on the moderating effects of foreign banks’ entry into three types of risk taking behaviors under different external environments.The results show that:(1)The entry of foreign banks can drive the continuous adjustment of risk-taking behavior of Chinese commercial banks.In particular,there is a difference between the entry of foreign banks into active risk,passive risk and overall risk taking behavior in Chinese banks,which has no obvious influence on active risk taking in Chinese banks.Based on the "competition-stability theory" and the "model effect",foreign banks’ passive risk taking has been significantly suppressed.Then it explains the aggravating effect of Chinese banks’ total risk-taking from three aspects: crowding out effect,risk contagion mechanism and financial regulation evasion effect.(2)Under different situations of internal affordability,the risk effect of foreign banks’ entry is quite different.Compared with banks with high liquidity level,weak profitability,small scale and insufficient capital,as well as state-owned banks,urban commercial banks and rural commercial banks,the impact of foreign banks’ entry on the overall risk taking of Chinese banks is more significant in the lower liquidity level,stronger profitability,large scale,adequately capitalized banks and joint-stock banks.In addition,compared with strong profitability,insufficient capital and non-state-owned banks,the inhibitory effect of foreign banks’ entry on passive risk taking of Chinese banks is stronger in weak profitability,sufficient capital and stateowned banks.(3)The influence of foreign banks on Chinese banks’ risk bearing is different under different external bearing environments.From the perspective of macroeconomic policy,economic policy uncertainty mitigated the boost effect of foreign banks’ entry on Chinese banks’ active risk and overall risk taking,but in the context of the information asymmetry between banks and enterprises and the increase of non-performing loans due to the deterioration of enterprise operating environment,economic policy uncertainty weakened the inhibition effect of foreign banks’ entry on Chinese banks’ passive risk taking.From the perspective of bank credit environment,the prosperity of the banking industry weakens the boosting effect of foreign banks’ entry on active risk and overall risk taking of Chinese banks,and strengthens the inhibiting effect of foreign banks’ entry on passive risk taking of Chinese banks,which is mainly attributed to the improvement of credit environment and credit counter-cyclical regulation mode.Based on the above research conclusions,this paper puts forward policy suggestions from four aspects: encouraging and guiding the development of foreign banks,building a new risk management and control system for banks,implementing differentiated financial policies and creating a good credit environment.This article systematically explores the influence of foreign bank’s entry into Chinese commercial bank’s risk assumption,and puts forward an explanation of the foreign bank’s impact perspective to understand the determining factors of commercial bank’s risk assumption,and then provides useful reference for our independent orderly expansion of financial industry opening and preventing and defusing systemic financial risks.It also provides a relatively rigorous analytical framework for evaluating the quality of financial opening and the risk effect of foreign banks’ entry.