Competition and Profitability: Impacts on Stability in Chinese Banking

Aaron Tan, Chi Keung Lau, Giray Gozgor

Research output: Contribution to journalArticle

Abstract

This study contributes to the banking literature by testing the joint impacts of profitability and industry environment on several types of risk (credit risk, liquidity risk, capital risk, and insolvency risk) in a sample of Chinese commercial banks over the period 2003 to 2015. The results show that a more highly developed banking sector increases the liquidity risk and credit risk of Chinese commercial banks but decreases their capital risk. It is further suggested that profitability may lead to a reduction in credit risk and insolvency risk. The findings from the current study thus have important policy implications in terms of improving stability in the Chinese banking industry.
Original languageEnglish
Number of pages24
JournalInternational Journal of the Economics of Business
Early online date24 Feb 2020
DOIs
Publication statusE-pub ahead of print - 24 Feb 2020

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