Effects of monetary policy and deposit insurance on financial policy: Does ownership structure matter? Evidence from Chinese banks

This study empirically investigates the influence of monetary policy and deposit insurance (DI) on the financial policy of Chinese banks, taking into account the moderating role of ownership structure. The study examines an unbalanced panel of 116 banks encompassing the years 2000 to 2023. Various analytical tools, including the two-step system GMM, quadratic and nonlinear associations, three-stage least squares (3SLS) technique, and alternative measures of financial policy, have been employed to analyse the latest dataset. The findings suggest that monetary policy and deposit insurance significantly influence the financial policy adherence to the ownership structure. The ownership structure of banks has a contingent impact on financial policy. The financial policy is subject to greater influence from commercial and other banks including cooperative or rural banks compared to specialized banks. Additionally, it has been noted that reserve requirements and deposit insurance displays U-shaped relationships with financial policy. The results have imperative implications for banks and regulatory bodies that are managing key financial instruments in the complex financial landscape.