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Market structure, risk taking, and the efficiency of Chinese commercial banks

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  • Hou, Xiaohui
  • Wang, Qing
  • Zhang, Qi

Abstract

We investigate the impacts of market structure and bank risk taking on the efficiency of Chinese commercial banks, employing a two-stage semi-parametric data envelopment analysis model. Our empirical results show that the intense market competition compels Chinese commercial banks to develop advanced technical experience and skills, thus improving their technical efficiency. Besides, the technical efficiency is positive associated with the risk taking. Since more risk taking implies a credit expansion of Chinese commercial banks based on the soft risk constraint, the improvement of technical efficiency may accompany an accumulation of banking risks in the current financial system of China.

Suggested Citation

  • Hou, Xiaohui & Wang, Qing & Zhang, Qi, 2014. "Market structure, risk taking, and the efficiency of Chinese commercial banks," Emerging Markets Review, Elsevier, vol. 20(C), pages 75-88.
    • Handle: RePEc:eee:ememar:v:20:y:2014:i:c:p:75-88
    DOI: 10.1016/j.ememar.2014.06.001
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    More about this item

    Keywords

    Market structure; Bank risk taking; Technical efficiency; Chinese commercial banks;
    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
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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