Earning response coefficients and the financial risks of China commercial banks
This paper reports new findings of a significant relationship between financial risks, price risk, market risk, foreign exchange and earnings response coefficients of commercial banks: The financial risks are interest rate risk, liquidity risk, credit risk and solvency risk. The methodology used is...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
World Business Institute
2010
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| Online Access: | http://psasir.upm.edu.my/id/eprint/14172/ http://psasir.upm.edu.my/id/eprint/14172/1/Earning%20response%20coefficients%20and%20the%20financial%20risks%20of%20China%20commercial%20banks.pdf |
| Summary: | This paper reports new findings of a significant relationship between financial risks, price risk, market risk, foreign exchange and earnings response coefficients of commercial banks: The financial risks are interest rate risk, liquidity risk, credit risk and solvency risk. The methodology used is the well accepted earnings-to-share price relation regression with the risks as the controlling factors. Overall, the study discovers that China commercial banks have a very strong returns-to-earnings relation. Test results indicate that the liquidity risk factors of China commercial banks contributed significantly to the returns-to-earnings relation. The liquidity risk contains the information beyond earnings changes in the return-to-earnings relation. These findings suggest that lending and borrowing activities of banks will be considered as efficient if activities reduce the liquidity risk through the proper asset-liability management. The results are plausible as they show the importance of asset-liability management in commercial banks. |
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