Proxy variable


Calculation method

Bank risk-taking

Non-performing loan ratio


non-performing loans to total loans ratio (%)

Loan allocation ratio


Ratio of loan provisions to total loans (%)

Z value


z i , t = ( r a i , t + e k i , t ) / σ ( r a i , t ) . r a i , t is the average return on assets, e k i , t is the ratio of shareholders’ equity to total assets, and σ ( r a i , t ) 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


The disclosure situation of 20 items in BankScope is selected for measurement and defined as: D I S = 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


Implementation of the deposit insurance system after 2015 takes the value of 1 and 0 otherwise.

Core explanatory variable

Value of franchise


B C V = ( R O E r f ) / ( 1 + δ ) , where ROE' is the pre-tax return on capital; r f is the risk-free rate of return and δ is the discount rate.

Capital adequacy ratio


Equity capital to total assets ratio (%)

Size of assets


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

Variable of control

Loan-to-deposit ratio


loan-to-deposit ratio (%)

Deposits to assets ratio


deposits to assets ratio (%)

Interbank offered rate


Weighted average interbank lending rate (7 days) (%)

GDP growth rate


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.