The Effect of China’s WTO Entry on Local U.S. Banks

Posted: 28 Dec 2022 Last revised: 7 Apr 2023

See all articles by Samar Ashour

Samar Ashour

University of Arkansas

Thomas J. Chemmanur

Boston College - Carroll School of Management

Xi Li

University of Arkansas - Department of Finance

Jiajie Xu

University of Iowa - Henry B. Tippie College of Business

Date Written: December 20, 2022

Abstract

We analyze how the product market competition shock due to China’s WTO entry affected local US banks across various regions. Using a difference-in-differences empirical strategy, we document that in regions with greater exposure to the shock, loan quality deteriorated and bank profitability declined more severely, coupled with slower loan growth and higher loan interest rates after the shock. Further, small banks lost market share and banking market concentration increased more in these regions. Overall, our paper documents how China’s WTO entry negatively affected the local banking system in the U.S.

Keywords: Product market competition; China’s WTO entry; bank performance; bank market structure; loan growth and pricing; US banks

JEL Classification: F13, G21, L1, L2

Suggested Citation

Ashour, Samar and Chemmanur, Thomas J. and Li, Xi and Xu, Jiajie, The Effect of China’s WTO Entry on Local U.S. Banks (December 20, 2022). Available at SSRN: https://ssrn.com/abstract=4307939

Samar Ashour

University of Arkansas ( email )

Fayetteville, AR 72701
United States
4795754505 (Phone)

Thomas J. Chemmanur

Boston College - Carroll School of Management ( email )

Finance Department, 436 Fulton Hall
Carroll School of Management, Boston College
Chestnut Hill, MA 02467-3808
United States
617-552-3980 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://https://www2.bc.edu/thomas-chemmanur/

Xi Li

University of Arkansas - Department of Finance ( email )

Fayetteville, AR 72701
United States

Jiajie Xu (Contact Author)

University of Iowa - Henry B. Tippie College of Business ( email )

Pappajohn Business Building S296
Iowa City, IA 52242-1000
United States

HOME PAGE: http://www.jiajiexu.com/

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