Bank Resilience and Risk-Taking Behavior: Evidence from Commercial Banks in China

Due to external adverse shocks such as COVID-19 and the Russia-Ukraine war, bank resilience is a vital measure used to defend against risk-taking. Using annual data from 42 listed commercial banks in China over the period 2013 to 2022, the study employs the Z-score as a dependent variable to measure risk-taking and the bank resilience index as an independent variable to measure capability to defend against bank risk-taking. In addition, the study adds bank-specific factors of bank size, net income margin, inefficiency, ratio of loans to deposits, cash flow, and diversification as control variables into the regression model. The empirical results of the study show that bank resilience could lower risk-taking, and bank size has a promoting effect on the relationship between bank resilience and risk-taking. As for heterogeneity analysis, banks with high-BRI have greater capability to defend against risk-taking than banks with low-BRI. Furthermore, the bank resilience of non-state-owned banks could reduce risk-taking, while state-owned banks have no impact of bank resilience on risk- taking.