Capital Supervision, Information Disclosure and Risk-taking-Evidence from Rural Commercial Banks in China

Based on yearly data of 44 rural commercial banks in China from 2012 to 2019, this research empirically investigates the impact of capital supervision and information disclosure on the risk-taking of rural commercial banks, and further explores the mechanisms through which capital supervision affects the risk-taking of said banks. The empirical results show that both capital supervision and information disclosure negatively affect their risk-taking. Moreover, the test of the mechanism suggests that capital supervision influences rural commercial banks' risk-taking through indirectly changing lending behavior. Our study offers important policy implications for regulators to reduce the risk-taking of rural commercial banks.