Capital Adequacy Ratio and Systemic Risk: an Econometric Analysis of the Financial Risk Management of Chinese Commercial Banks

The capital adequacy ratio and systemic risk are two interlinked core concepts within the financial system, playing a crucial role in the risk management and stability of the banking sector. This study rigorously analyzes the impact of capital adequacy ratios on systemic risk among Chinese commercial banks employing advanced econometric methods. Considering the complexities of the global financial system, traditional capital adequacy frameworks have struggled to comprehensively address the multifaceted risks present in contemporary financial markets. By constructing multiple econometric models and integrating recent financial market dynamics, this paper demonstrates the inhibitory effect of the capital adequacy ratio on banks' systemic risk and explores the mediating role of capital buffer mechanisms in this relationship. The findings indicate that enhancing capital adequacy ratios not only significantly reduces the transmission of systemic risks among banks, but also bolsters their resilience and capacity to navigate global uncertainties. The academic contribution of this research lies in reevaluating the role of capital adequacy from a dynamic, global perspective and providing regulators with a robust framework to refine capital regulation, particularly in an era of accelerated financial innovation aimed at effectively mitigating systemic financial risks. These insights offer fresh and profound theoretical support for banking capital management practices and policymaking.