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Bank profitability and GDP growth in China: a note

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  • Yong Tan
  • Christos Floros

Abstract

This article examines the effect of GDP growth on bank profitability in China over the period 2003--2009. The one-step system GMM estimator is used to test the persistence of profitability in the Chinese banking industry. The empirical findings suggest that cost efficiency is positively related to bank profitability, while lower profitability can also be explained by higher taxes paid by banks. In addition, there is a negative relationship between GDP growth and bank profitability. Furthermore, the results show that (1) the profitability in the Chinese banking industry is significantly affected by the level of non-performing loans, and (2) Chinese banks with higher levels of capital have lower profitability. Finally, we find that the departure from a perfectly competitive market structure in the Chinese banking industry is relatively small.

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File URL: http://hdl.handle.net/10.1080/14765284.2012.703541
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Journal of Chinese Economic and Business Studies.

Volume (Year): 10 (2012)
Issue (Month): 3 (January)
Pages: 267-273

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Handle: RePEc:taf:jocebs:v:10:y:2012:i:3:p:267-273

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Cited by:
  1. Hakimi, Abdelaziz & Hamdi, Helmi & Djlassi, Mouldi, 2013. "Testing the concentration-performance relationship in the Tunisian banking sector," MPRA Paper 55927, University Library of Munich, Germany, revised 2013.
  2. Adela Socol & Adina Elena Danuletiu, 2013. "Analysis Of The Romanian Banksā€˜ Performance Through Roa, Roe And Non-Performing Loans Models," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(15), pages 24.

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