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Shadow Banking, Bank Ownership, and Bank Efficiency in China

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Listed:
  • Ning Ding
  • Hung-Gay Fung
  • Jingyi Jia

Abstract

This study uses 15 years of bank data and a one-stage stochastic frontier analysis framework to examine how shadow banking affects the profit and cost efficiency of Chinese banks. Our results indicate that shadow banking is negatively related to both profit and cost efficiency and positively related to earnings volatility, credit risk and liquidity risk of the Chinese banks. In examining the performance of foreign banks with that of local Chinese city commercial banks, we find that foreign banks in China are less profit- and cost-efficient, supporting the home-field-advantage hypothesis that domestic banks are more efficient than foreign banks.

Suggested Citation

  • Ning Ding & Hung-Gay Fung & Jingyi Jia, 2020. "Shadow Banking, Bank Ownership, and Bank Efficiency in China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(15), pages 3785-3804, December.
    • Handle: RePEc:mes:emfitr:v:56:y:2020:i:15:p:3785-3804
    DOI: 10.1080/1540496X.2019.1579710
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    Cited by:

    1. Wang, Yao & Drabek, Zdenek & Wang, Zhengwei, 2022. "The role of social and psychological related soft information in credit analysis: Evidence from a Fintech Company," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    2. Ridoy Deb Nath & Mohammad Ashraful Ferdous Chowdhury, 2021. "Shadow banking: a bibliometric and content analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-29, December.

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