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Risk, competition and efficiency in banking: Evidence from China

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  • Tan, Yong
  • Floros, Christos

Abstract

This paper tests the interrelationships among risk, competition, and efficiency in the Chinese banking industry between 2003 and 2013, with an efficiency-adjusted Lerner index and stability inefficiency as the indicators of competition and insolvency risk. The results show that Chinese commercial banks with higher efficiency have higher credit risk and insolvency risk, but lower liquidity risk and capital risk. Greater competition decreases credit risk and insolvency risk, but increases liquidity risk. Credit risk and insolvency risk are significantly and positively related to efficiency, while liquidity risk and capital risk are significantly and negatively related. Finally, lower liquidity risk decreases competition.

Suggested Citation

  • Tan, Yong & Floros, Christos, 2018. "Risk, competition and efficiency in banking: Evidence from China," Global Finance Journal, Elsevier, vol. 35(C), pages 223-236.
  • Handle: RePEc:eee:glofin:v:35:y:2018:i:c:p:223-236
    DOI: 10.1016/j.gfj.2017.12.001
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    References listed on IDEAS

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    Cited by:

    1. Hu, May & Zhang, Jing & Chao, Chichur, 2019. "Regional financial efficiency and its non-linear effects on economic growth in China," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 193-206.
    2. Partovi, Elmira & Matousek, Roman, 2019. "Bank efficiency and non-performing loans: Evidence from Turkey," Research in International Business and Finance, Elsevier, vol. 48(C), pages 287-309.

    More about this item

    Keywords

    Competition; Risk; Efficiency; Chinese banking;

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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