Bank Performance in China: A Perspective from Bank Efficiency, Risk-taking and Market Competition

Jianchun Fang, Chi Keung Lau, Zhou Lu, Yong Tan, Hua Zhang

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

The current paper contributes to the empirical literature on bank profitability by testing the joint-impact of different types of risk, competition in different banking markets and different types of efficiency on bank profitability using a sample of Chinese commercial banks over the period 2003-2017. In particular, we fill in the gap of the empirical studies by examining the impact of efficiency on profitability when banks undertake different levels of risk-taking behaviour and face different degrees of competition. The results show that competition in the Chinese banking markets (deposit market, loan market and non-interest income market) is stronger over the period 2003-2005 and also 2014-2017. In addition, it is found that bank size, cost efficiency, profit efficiency and inflation are significantly related to bank profitability. Finally, we find that the positive impact of cost efficiency on profitability is stronger when banks undertake higher levels of risk and face more competition.
Original languageEnglish
Pages (from-to)290-309
Number of pages20
JournalPacific Basin Finance Journal
Volume56
Early online date18 Jun 2019
DOIs
Publication statusPublished - 1 Sep 2019

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