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Institutional quality, banking marketization, and bank stability: Evidence from China

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  • Hou, Xiaohui
  • Wang, Qing

Abstract

This paper investigates the relationship between banking marketization and bank stability across different levels of institutional quality in China. Our results suggest that banking marketization does not inevitably have a negative impact on bank stability. One of the two banking marketization indicators, namely the proportion of deposits taken by non-state-owned commercial banks to total deposits, has a significant positive impact on bank stability; in contrast, the other indicator, the proportion of loans issued to non-state-owned hybrid-sector firms to total loans in China’s banking sector, is negatively associated with bank stability. Furthermore, an improvement of the institutional quality can reduce the adverse influence of banking marketization on bank stability on the whole.

Suggested Citation

  • Hou, Xiaohui & Wang, Qing, 2016. "Institutional quality, banking marketization, and bank stability: Evidence from China," Economic Systems, Elsevier, vol. 40(4), pages 539-551.
    • Handle: RePEc:eee:ecosys:v:40:y:2016:i:4:p:539-551
    DOI: 10.1016/j.ecosys.2016.01.003
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    Cited by:

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    2. Hela Kallel & Mohamed Triki, 2024. "Foreign ownership, bank efficiency and stability: Whether the institutional quality of countries is important?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 632-653, January.
    3. Zhang, Zhiwei & Wu, Fei, 2020. "Moral hazard, external governance and risk-taking: Evidence from commercial banks in China," Finance Research Letters, Elsevier, vol. 37(C).
    4. Salma Louati & Younes Boujelbene, 2020. "Inflation targeting and bank risk: The interacting effect of institutional quality," Cogent Business & Management, Taylor & Francis Journals, vol. 7(1), pages 1847889-184, January.
    5. Jayakumar, Manju & Pradhan, Rudra P. & Dash, Saurav & Maradana, Rana P. & Gaurav, Kunal, 2018. "Banking competition, banking stability, and economic growth: Are feedback effects at work?," Journal of Economics and Business, Elsevier, vol. 96(C), pages 15-41.

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    More about this item

    Keywords

    Banking marketization; Institutional quality; Bank stability; China;
    All these keywords.

    JEL classification:

    • 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
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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