The impacts of competition and risk on profitability in Chinese banking: Evidence from Boone indicator and stability inefficiency

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Abstract

This paper tests the competition in different banking markets (deposit market, loan market, and non-interest income market) using a sample of Chinese commercial banks between 2003-2013 and further examines the impact of competition on bank profitability while controlling for different types of risk. The results show that non-interest income has a higher level of competition compared to the other two markets during early years of the examined period. The findings further report that in a higher competitive deposit market, Chinese commercial banks have lower levels of profitability. Finally, it is suggested the bank profitability is significantly affected by liquidity risk.
LanguageEnglish
Pages523-554
Number of pages32
JournalAnnals of Economics and Finance
Volume19
Issue number2
Publication statusPublished - 1 Nov 2018

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Profitability
Banking
Inefficiency
Commercial banks
Non-interest income
Bank profitability
Deposits
Loans
Liquidity risk
Chinese market

Cite this

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title = "The impacts of competition and risk on profitability in Chinese banking: Evidence from Boone indicator and stability inefficiency",
abstract = "This paper tests the competition in different banking markets (deposit market, loan market, and non-interest income market) using a sample of Chinese commercial banks between 2003-2013 and further examines the impact of competition on bank profitability while controlling for different types of risk. The results show that non-interest income has a higher level of competition compared to the other two markets during early years of the examined period. The findings further report that in a higher competitive deposit market, Chinese commercial banks have lower levels of profitability. Finally, it is suggested the bank profitability is significantly affected by liquidity risk.",
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