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The impact of financial development and bank characteristics on the operational performance of commercial banks in the Chinese transitional economy

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  • Hsiu‐Ling Wu
  • Chien‐Hsun Chen
  • Fang‐Ying Shiu

Abstract

Purpose - This paper attempts to empirically examine the impact of financial development and bank characteristics on the operational performance of commercial banks in the Chinese transitional economy. Design/methodology/approach - Pooled cross‐section (banks) and time‐series data are employed in the empirical estimation, with the sample comprising a total of 14 Chinese banks. The period under consideration extends from 1996‐2004. Fixed effects and random effects models are estimated. Findings - Empirical results exhibit higher levels of moneterization that can translate into better ROA performance for banks. The longer a bank has been in existence, the worse its ROA performance is found to be. Rather than leading to improved profitability, Chinese banks' efforts to develop non‐traditional banking business actually have a negative impact on the ROA. The ROA performance of larger Chinese banks (in terms of assets) is found to be inferior to that of the smaller shareholding commercial banks. Originality/value - Particular emphasis will be placed on the unique characteristics of China's banking industry during this period of institutional transformation.

Suggested Citation

  • Hsiu‐Ling Wu & Chien‐Hsun Chen & Fang‐Ying Shiu, 2007. "The impact of financial development and bank characteristics on the operational performance of commercial banks in the Chinese transitional economy," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 34(5), pages 401-414, October.
    • Handle: RePEc:eme:jespps:v:34:y:2007:i:5:p:401-414
    DOI: 10.1108/01443580710823211
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    Citations

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    Cited by:

    1. Hongxing Yao & Muhammad Haris & Gulzara Tariq, 2018. "Profitability Determinants of Financial Institutions: Evidence from Banks in Pakistan," IJFS, MDPI, vol. 6(2), pages 1-28, May.
    2. Chin‐Hwa Lu & Chung‐Hua Shen & Meng‐Wen Wu & Zhi‐Wen Wu, 2010. "Cooperation Satisfaction and Performance: Empirical Evidence from Chinese Banks and Their Foreign Strategic Investors," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 18(6), pages 90-108, November.
    3. Muhammad Mahmood Shah Khan & Farrukh Ijaz & Ejaz Aslam, 2014. "Determinants of Profitability of Islamic Banking Industry: An Evidence from Pakistan," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 6(2), pages 27-46, October.
    4. Hsiu-I Ting, 2017. "Financial development, role of government, and bank profitability: evidence from the 2008 financial crisis," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(2), pages 370-391, April.
    5. Duc H. Vo & Nhan T. Nguyen, 2021. "Does financial inclusion improve bank performance in the Asian region?," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 35(2), pages 123-135, November.
    6. Hussein A. Hassan Al-Tamimi, 2010. "Factors Influencing Performance Of The Uae Islamic And Conventional National Banks," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 4(2), pages 1-9.

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