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The Nonlinear Relationship between Banks Competition and Financial Stability in China

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  • Shehong Hou

Abstract

For the deeply impacts of China’s banks stability on itself and world economy, we use dynamic GMM method to investigate the nonlinear relationship between banks competition and their stability. When competition is lower than certain level, the “competition-stability” comes into existence, otherwise “competition-fragility” holds on. The stock market disaster in 2015 does not have significant influence on the z-scores of banks, but it caused the non-performance loans increase evidently. The separate supervision and separate operation of financial industry may be the main reasons for the above results. China should take some actions to maintain appropriate competition for the stability of its banks system.

Suggested Citation

  • Shehong Hou, 2021. "The Nonlinear Relationship between Banks Competition and Financial Stability in China," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 13(9), pages 1-33, August.
    • Handle: RePEc:ibn:ijefaa:v:13:y:2021:i:9:p:33
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    References listed on IDEAS

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    1. Allen N. Berger & Leora F. Klapper & Rima Turk-Ariss, 2017. "Bank competition and financial stability," Chapters, in: Jacob A. Bikker & Laura Spierdijk (ed.), Handbook of Competition in Banking and Finance, chapter 10, pages 185-204, Edward Elgar Publishing.
    2. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2006. "Bank concentration, competition, and crises: First results," Journal of Banking & Finance, Elsevier, vol. 30(5), pages 1581-1603, May.
    3. Anginer, Deniz & Demirguc-Kunt, Asli & Zhu, Min, 2012. "How does bank competition affect systemic stability ?," Policy Research Working Paper Series 5981, The World Bank.
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    Cited by:

    1. Nicholas Addai Boamah & Emmanuel Opoku & Kingsley Opoku Appiah, 2022. "Efficiency, foreign banks presence, competition and risk exposure of banks in middle-income economies," SN Business & Economics, Springer, vol. 2(8), pages 1-21, August.
    2. Khan, Habib Hussain, 2022. "Bank competition, financial development and macroeconomic stability: Empirical evidence from emerging economies," Economic Systems, Elsevier, vol. 46(4).

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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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