Can Foreign Banks Compete in China?

20 Pages Posted: 17 Dec 2017

See all articles by Necmi K. Avkiran

Necmi K. Avkiran

University of Queensland - Business School; Financial Research Network (FIRN)

Yushu Zhu

University of Queensland - Business School

David W.L. Tripe

Massey University - School of Economics and Finance

Kathleen Walsh

Australian National University (ANU)

Date Written: December 2017

Abstract

Foreign banks in China have faced strict regulatory requirements that were not imposed on domestic banks and as such they have performed poorly in profitability rankings. Recent changes in the Chinese regulatory requirements prompt us to consider whether foreign banks are now on an equal footing with the Chinese domestic banks. Using Cobb–Douglas stochastic frontier analysis with total income as the dependent variable, we find no significant performance difference between foreign and domestic banks. However, robustness testing using the individual components of total income as dependent variables reveals that foreign banks need to improve efficiency of their income generation.

Keywords: efficiency, foreign vs. domestic Chinese banks, profitability, ranking, stochastic frontier analysis

Suggested Citation

Avkiran, Necmi K. and Zhu, Yushu and Tripe, David W.L. and Walsh, Kathleen, Can Foreign Banks Compete in China? (December 2017). Accounting & Finance, Vol. 57, Issue 4, pp. 961-980, 2017, Available at SSRN: https://ssrn.com/abstract=3088233 or http://dx.doi.org/10.1111/acfi.12188

Necmi K. Avkiran (Contact Author)

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Yushu Zhu

University of Queensland - Business School ( email )

Blair Drive
Brisbane
Australia

HOME PAGE: http://https://www.business.uq.edu.au/staff/yushu-elizabeth-zhu

David W.L. Tripe

Massey University - School of Economics and Finance ( email )

Private Bag 11-222
Palmerston North, 30974
New Zealand

Kathleen Walsh

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

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