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The Impacts of Competition and Risk on Profitability in Chinese Banking: Evidence from Boone Indicator and Stability Inefficiency

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  • Yong Tan

    (Department of Accountancy, Finance and Economics, Huddersfield Business School, University of Huddersfield)

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 the non-interest income market 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 that bank profitability is significantly affected by liquidity risk.

Suggested Citation

  • Yong Tan, 2018. "The Impacts of Competition and Risk on Profitability in Chinese Banking: Evidence from Boone Indicator and Stability Inefficiency," Annals of Economics and Finance, Society for AEF, vol. 19(2), pages 523-554, November.
    • Handle: RePEc:cuf:journl:y:2018:v:19:i:2:tan
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    More about this item

    Keywords

    Bank profitability; Bank competition; GMM; China;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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