Variable | Proxy variable | Symbol | Calculation method |

Bank risk-taking | Non-performing loan ratio | NPL | non-performing loans to total loans ratio (%) |

Loan allocation ratio | LLPR | Ratio of loan provisions to total loans (%) | |

Z value | lnZ | ${z}_{i,t}=\left(r{a}_{i,t}+e{k}_{i,t}\right)/\sigma \left(r{a}_{i,t}\right)$ . $r{a}_{i,t}$ is the average return on assets, $e{k}_{i,t}$ is the ratio of shareholders’ equity to total assets, and $\sigma \left(r{a}_{i,t}\right)$ is the three-year rolling standard deviation of $r{a}_{i,t}$ based on periods $t$ , $t-1$ and $t-2$ . | |

Information disclosure | Information disclosure index | DIS | The disclosure situation of 20 items in BankScope is selected for measurement and defined as: $DIS=\sum {S}_{i}/20$ , where ${S}_{i}$ represents the score of various information disclosure. If it is disclosed, it is denoted as 1; otherwise, it is denoted as 0. |

Deposit insurance system | dummy variable | INS | Implementation of the deposit insurance system after 2015 takes the value of 1 and 0 otherwise. |

Core explanatory variable | Value of franchise | BCV | $BCV=\left(RO{E}^{\prime}-{r}_{f}\right)/\left(1+\delta \right)$ , where |

Capital adequacy ratio | Cap | Equity capital to total assets ratio (%) | |

Size of assets | Size | Natural logarithm of the Bank’s total assets (RMB100 million) | |

Variable of control | Loan-to-deposit ratio | LDR | loan-to-deposit ratio (%) |

Deposits to assets ratio | DAR | deposits to assets ratio (%) | |

Interbank offered rate | IIR | Weighted average interbank lending rate (7 days) (%) | |

GDP growth rate | GDPR | The national GDP growth rate is used for state-owned commercial banks and joint-stock commercial banks, while the regional GDP growth rate (%) is used for urban commercial banks, rural commercial banks and foreign banks. |