The Comprehensive Effects of Ownership Concentration and External Governance on Banks’ Capital Buffers

Abstract

We investigate the effect of ownership structure on banks’ capital buffers with a method of System GMM, for a sample of main commercial banks in China. The increase of ownership concentration can promote the buildup of capital buffers, while implicit guarantee from government can reduce this effect for the systemically important banks. The relative lower ratio of interbank deposit to total deposits weaken the supervision from peer banks for the accumulation of capital buffers. Adequately increase the ratio of major shareholders, accelerate the development of interbank deposit market and reduce government implicit guarantees are very essential for Chinese financial stability.