Research on State-Owned Shareholdings and Credit Risk : The Perspective of Mixed Ownership Reform in China's Banking Sector

Non-performing loans(NPLs) of commercial banks hamper the development of Chinese banking sector for long. The state-owned shareholdings representing the willingness of government intervention are taken as the driven factor for the high NPL ratio of commercial banks. In the process of deepening mixed-ownership reform, the three types of Chinese commercial banks adopt different state-owned shareholding change strategies: the average of state-owned shareholdings’ ratio in the state-owned commercial banks(SOCB) is always much higher than that in the joint-stocked commercial banks(JSCBs) and city and rural commercial banks(CRCBs), however, the average ratio of state-shareholdings in JSCBs and CRCBs increase slightly since SOCBs decreased a little bit. This paper discusses the heterogeneous impact of state-owned shareholdings on credit risk in China’s three types of commercial banks in mixed-ownership reform. Using bank data for 2008–2020, We find that state-owned shareholdings significantly increase the credit risk of SOCBs and JSCBs, but decrease the credit risk of CRCBs. This paper also finds the transmission mechanisms of state-owned shareholdings impacting on credit risk are different among the three types of banks: loan scale is the mediating channel in SOCBs, leverage is in JSCBs and capital adequacy ratio is in CRCBs