Risk, Competition and Cost Efficiency in the Chinese Banking Industry

Yong Tan, Christos Floros

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

Using a sample of Chinese commercial banks over the period 2003-2013, this paper tests the interrelationships between credit risk, competition and cost efficiency in the Chinese banking industry under a three-stage least square estimator. The findings suggest that a higher level of competition leads to higher credit risk of Chinese commercial banks and a higher level of efficiency leads to lower credit risk. In addition, it is found that higher level of efficiency results in higher level of competition in the Chinese banking industry and higher levels of credit risk precede an increase in the level of competition. Finally, the results show that Chinese commercial banks with higher levels of credit risk have lower levels of cost efficiency and competition-efficiency hypothesis holds in the Chinese banking industry. The results provide policy implications to the Chinese government and banking regulatory authorities.
Original languageEnglish
Pages (from-to)144-161
Number of pages18
JournalInternational Journal of Banking, Accounting and Finance
Volume10
Issue number2
Early online date24 Apr 2019
DOIs
Publication statusPublished - 2019

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Banking industry
Credit risk
Commercial banks
Banking
Policy implications
Authority
Government
Three-stage least squares
Interrelationship
Least squares estimator

Cite this

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Risk, Competition and Cost Efficiency in the Chinese Banking Industry. / Tan, Yong; Floros, Christos.

In: International Journal of Banking, Accounting and Finance, Vol. 10, No. 2, 2019, p. 144-161.

Research output: Contribution to journalArticle

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