What explains the low profitability of Chinese banks?
AbstractThis paper analyzes empirically what explains the low profitability of Chinese banks for the period 1997-2004. We find that better capitalized banks tend to be more profitable. The same is true for banks with a relatively larger share of deposits and for more X-efficient banks. In addition, a less concentrated banking system increases bank profitability, which basically reflects that the four state-owned commercial banks - China's largest banks - have been the main drag for system's profitability. We find the same negative influence for China's development banks (so-called Policy Banks), which are fully state-owned. Instead, more market-oriented banks, such as joint-stock commercial banks, tend to be more profitable, which again points to the influence of government intervention in explaining bank performance in China. These findings should not come as a surprise for a banking system which has long been functioning as a mechanism for transferring huge savings to meet public policy goals.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 33 (2009)
Issue (Month): 11 (November)
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China Bank profitability Bank reform;
Other versions of this item:
- Alicia Garcia Herrero & Sergio Gavila & Daniel Santabarbara, 2009. "What explains the low profitability of Chinese Banks?," Working Papers 0909, BBVA Bank, Economic Research Department.
- Alicia García-Herrero & Sergio Gavilá & Daniel Santabárbara, 2009. "What explains the low profitability of Chinese banks?," Banco de Espaï¿½a Working Papers 0910, Banco de Espa�a.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
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