Bank Performance in China: A Perspective from Bank Efficiency, Risk-taking and Market Competition
43 Pages Posted: 31 Mar 2017 Last revised: 20 Jul 2020
Date Written: March 30, 2017
The current paper contributes to the empirical literature in bank profitability by being the first piece of research innovatively uses Boone indicator to test the competition in different banking markets namely deposit market, loan market and non-interest income market and further examine their impacts on profitability using a sample of Chinese commercial banks over the period 2003-2013 under a Generalized Method of Moments (GMM) one-step system estimator. In addition, the current study comprehensively examines different types of efficiencies and risk of Chinese commercial banks and further evaluates their impacts on bank profitability. The results show that cost efficiency, profit efficiency and liquidity risk are significantly related to bank profitability in China. Finally, the results show that higher competitive deposit market increases the Net Interest Margin (NIM) of Chinese commercial banks.
Keywords: interest rate liberalization, bank competition, bank efficiency, bank profitability, China
JEL Classification: G21, C23
Suggested Citation: Suggested Citation