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Social Trust, Yield Fluctuation and Bank Risk

【Authors】
LI Junqing, LI Shuangjian & ZHAO Xuxia
【WorkUnit】
LI Junqing, LI Shuangjian(Nankai University)
ZHAO Xuxia (Shanghai University of Finance and Economics)
【Abstract】

Social trust is a lubricant for economic exchange, and the most effective mechanism for supervising contract enforcement. Based on the data of Chinas city commercial banks from 2007 to 2015, the paper analyzes the impact of social trust on bank risk. The study find that the improvement of social trust significantly reduced the bank risk, and further revealed the impact of social trust on bank risk. It is found that the fluctuation of asset return has played significant mediating effects on social trust and bank risk, and the proportion of median effect on the total effect is up to 90.43%. There is a transmission mechanism of “social trust to the fluctuation of asset return, and then to the bank bankruptcy risk” Finally, this paper finds that the social trust in the areas with high legal protection is more prominent in reducing the bank risk. The research of this paper has a strong policy means that by improving the level of social trust can effectively curb bank risk.

JEL:G21, Z13, D86

【KeyWords】
Social Trust, Yield Fluctuation, Bank Risk, Mediation Effect