Abstract

This paper analyzes the adjustment of Chinese commercial banks’ capital and risk after the implementation of Measures for the Management of Capital Adequacy Ratios of Commercial Banks, using 3SLS technique and a simultaneous equation model (Shrieves and Dahl, 1992) with data of 28 commercial banks. The results suggest that banks increase the capital level in order to meet the reqirement of capital regulation; the regulation pressure increases the risk taken by banks with inadequate capital, and increases the capital level in banks with adequate capital. Key words: Capital Adequacy Ratios; Regulation Pressure; Risk Taking

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