China’s anti-corruption campaign and bank loan loss provisions: Evidence from a quasi-natural experiment

Abstract

This paper employs a difference-in-differences estimation to investigate the causal effects of the anti-corruption campaign on bank loan loss provisions in China. I find that the anti-corruption campaign has significantly reduced bank loan loss provisions. My finding are particularly pronounced in joint-stock commercial and city commercial banks. I analyze the mechanism from the perspective of bank risk management, and find that banks with less non-performing loans and more risk reserves have less provision for loan losses in the anti-corruption campaign, indicating that risk prevention motivation is its main purpose.