Risk, competition, and efficiency in banking

Evidence from China

Yong Tan, Christos Floros

Research output: Contribution to journalArticle

10 Citations (Scopus)

Abstract

This paper tests the interrelationships among risk, competition, and efficiency in the Chinese banking industry between 2003 and 2013, with an efficiency-adjusted Lerner index and stability inefficiency as the indicators of competition and insolvency risk. The results show that Chinese commercial banks with higher efficiency have higher credit risk and insolvency risk, but lower liquidity risk and capital risk. Greater competition decreases credit risk and insolvency risk, but increases liquidity risk. Credit risk and insolvency risk are significantly and positively related to efficiency, while liquidity risk and capital risk are significantly and negatively related. Finally, lower liquidity risk decreases competition.
Original languageEnglish
Pages (from-to)223-236
Number of pages14
JournalGlobal Finance Journal
Volume35
Early online date12 Dec 2017
DOIs
Publication statusPublished - Feb 2018

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Banking
China
Liquidity risk
Insolvency risk
Credit risk
Risk capital
Banking industry
Commercial banks
Inefficiency
Lerner index
Interrelationship

Cite this

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abstract = "This paper tests the interrelationships among risk, competition, and efficiency in the Chinese banking industry between 2003 and 2013, with an efficiency-adjusted Lerner index and stability inefficiency as the indicators of competition and insolvency risk. The results show that Chinese commercial banks with higher efficiency have higher credit risk and insolvency risk, but lower liquidity risk and capital risk. Greater competition decreases credit risk and insolvency risk, but increases liquidity risk. Credit risk and insolvency risk are significantly and positively related to efficiency, while liquidity risk and capital risk are significantly and negatively related. Finally, lower liquidity risk decreases competition.",
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Risk, competition, and efficiency in banking : Evidence from China. / Tan, Yong; Floros, Christos.

In: Global Finance Journal, Vol. 35, 02.2018, p. 223-236.

Research output: Contribution to journalArticle

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