Risk, Profitability, and Competition: Evidence from the Chinese Banking Industry

Aaron Tan, Christos Floros

Research output: Contribution to journalArticle

Abstract

This paper investigates the inter-temporal relationship between banking profitability, competition and risk of a sample of Chinese commercial banks by employing several profitability and risk indicators and using Seemingly Unrelated Regression (SUR) under a panel data framework over 2003-2009. The results support the Structure-Conduct-Performance (SCP) theory which states that there is a negative impact of competition on bank profitability. We also find that banks with higher profitability normally operate in a less competitive environment. The results have potentially important implications for the government and banking regulatory authorities to make relevant policies.
Original languageEnglish
Pages (from-to)303-319
Number of pages17
JournalThe Journal of Developing Areas
Volume48
Issue number3
Early online date4 May 2014
DOIs
Publication statusPublished - 1 Jul 2014

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