The Credit Risk of China’s Listed Commercial Banks and Its Determinants

Huang, Yu-Han (2022) The Credit Risk of China’s Listed Commercial Banks and Its Determinants. [Dissertation (University of Nottingham only)]

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Among the many risks that commercial banks face, credit risk is one of the primary risks that can lead to bank failures and trigger regional or even global economic crises. The core of credit risk management is to measure credit risk, identify its determinants, and take targeted measures to effectively reduce credit risk. As a result, this study employs the KMV model to calculate the distance to default of the three most important types of commercial banks in China to obtain a reliable indicator of credit risk. Furthermore, a multiple linear regression model with panel data is used to empirically analyse the macro and micro factors that influence the credit risk of Chinese commercial banks in order to determine the extent to which these factors influence credit risk.

The default distance of Chinese commercial banks is obtained through the procedure of the KMV model. In the longitudinal time dimension, the trend change of the weighted average of the overall credit default distance of Chinese commercial banks is divided into four main phases. On a cross-sectional basis, comparing the statistical values of the three different natures of commercial banks in China reveals that the average default distance of state-owned banks is much higher than that of joint-stock commercial banks and city commercial banks. Among the three types of banks, city commercial banks have the highest credit risk.

In the multiple linear regression model, both the macro and micro factors selected proved to be significant. This implies that the credit risk of commercial banks in China depends on GDP growth rate, unemployment rate, money growth rate, asset size, capital adequacy, management efficiency and loan-to-deposit ratio, all of which are simultaneously at play. The research model is therefore of economic importance. By analysing how each factor affects Chinese commercial banks' credit risk, it can help commercial banks to take corresponding measures for effective risk management.

Item Type: Dissertation (University of Nottingham only)
Depositing User: HUANG, Yuhan
Date Deposited: 25 Apr 2023 13:08
Last Modified: 25 Apr 2023 13:08

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