Information Disclosure and Bank Risk-Taking under a Partially Implicit Deposit Insurance System: Evidence from China

This article examines the role of information disclosure on bank risk-taking behaviour in China. The study uses a game theory model to analyse the interaction mechanism between bank risk-taking behaviour and its information disclosure under China's partially implicit deposit insurance system. It is found that banks that are more likely to receive a government bailout when they are in trouble tend to take excessive risk. In addition, the implicit guarantee weakens the market-monitoring effect of information disclosure. Using data from 60 commercial banks in China, we find strong empirical support for our findings.