Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/28201
Title: Interest rate deregulation and banks' off-balance-sheet activities: a Hong Kong perspective
Authors: Cheng, ACS 
Fung, MK 
Hu, KP
Cheng, LTW 
Keywords: Hong Kong banks
Interest rate deregulation
Off-balance-sheet activities
Issue Date: 2015
Publisher: Routledge, Taylor & Francis Group
Source: Applied economics, 2015, v. 47, no. 47, p. 5088-5102 How to cite?
Journal: Applied economics 
Abstract: Through the interest rate deregulation and banks' off-balance-sheet activities (OBSAs) in Hong Kong, this study investigates the debate over the impact of banking deregulation on banks' risk-taking behaviour. On the one hand, the Arrow effect implies that increased competition caused by the interest rate deregulation motivates Hong Kong banks to speed up their development of OBSAs as an additional but riskier income source. On the other hand, the Schumpeterian effect implies that the deregulation may reduce the banks' financial capability in developing new products and thus downscale their OBSA adoption. Our findings show that, while the negative scale effect is statistically insignificant, the interest rate deregulation has a positive and significant impact on the adoption rate for all OBSA categories. We therefore conclude that the interest rate deregulation unambiguously leads to riskier bank behaviour in terms of higher OBSA adoption.
URI: http://hdl.handle.net/10397/28201
ISSN: 0003-6846
EISSN: 1466-4283
DOI: 10.1080/00036846.2015.1042144
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