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Impact of shadow banking on Chinese banks’ efficiency: The moderating effect of ownership

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  • Chen, Jing
  • Kamarudin, Fakarudin
  • Amin Noordin, Bany Ariffin
  • Theng, Lau Wei
  • Zhou, Tim

Abstract

This study examines the effect of shadow banking on the efficiency of Chinese banks and how ownership status moderates the relationship. It measures the technical efficiency score of a sample consisting of 160 Chinese commercial banks from 2011 to 2022 using data envelopment analysis via an intermediary approach. Using the ordinary least squares, feasible generalized least squares, and panel-corrected standard error estimation methods, the findings demonstrate that shadow banking significantly and positively affects bank efficiency for all banks in the sample. Furthermore, while foreign ownership strengthens this relationship, the inverse is true for joint-stock and city commercial banks. However, state-owned banks and rural commercial banks show insignificant moderating effects.

Suggested Citation

  • Chen, Jing & Kamarudin, Fakarudin & Amin Noordin, Bany Ariffin & Theng, Lau Wei & Zhou, Tim, 2025. "Impact of shadow banking on Chinese banks’ efficiency: The moderating effect of ownership," Finance Research Letters, Elsevier, vol. 83(C).
    • Handle: RePEc:eee:finlet:v:83:y:2025:i:c:s1544612325009419
    DOI: 10.1016/j.frl.2025.107682
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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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