Geographic expansion and risk-taking of city commercial banks

Using panel data from 125 Chinese city commercial banks between 2007 and 2023, this study examines the impact of geographic business expansion on risk-taking. The results show that geographic expansion significantly increases bank risk. The effect is more pronounced when headquarters-city economic volatility and ownership concentration are high, particularly among smaller and less diversified banks, while banks headquartered in eastern regions exhibit weaker effects. Quantile regressions further reveal that the marginal effect of expansion is concentrated among low-risk banks, suggesting that more prudent institutions are better able to absorb shocks from geographic diversification. These findings shed light on the effects of geographic expansion and provide new evidence on how institutional and regional factors shape the risk-taking behavior of city commercial banks.