Determinants of the Performance of Banks in Hong Kong
This paper develops a model to identify the major determinants of a bank's profit, and the general level of profitability of a banking market. It found that in Hong Kong's case, market structure, such as market concentration and market shares of banks, is not a major contributory factor. Cost efficiency of banks, which measures the ability of banks to optimise their input mix for producing outputs, is a major determinant of banks' profitability. Since larger banks are found to be in general more cost efficient than smaller banks in our previous study on banks' efficiency, larger banks can offer services at lower prices to compete with smaller banks, yet attaining a similar or even higher level of profits. Smaller banks may, therefore, be more vulnerable to intense competitions in the loan market than larger banks, particularly in cut-throat price wars.
|Date of creation:||Apr 2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.info.gov.hk/hkma/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:hkg:wpaper:0706. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Simon Chan)
If references are entirely missing, you can add them using this form.