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Bank ownership and efficiency in China: what lies ahead in the world's largest nation?

Author

Listed:
  • Berger, Allen N.
  • Hasan, Iftekhar
  • Zhou, Mingming

Abstract

China is reforming its banking system, partially privatizing and permitting minority foreign ownership of three of the dominant 'big four' state-owned banks. This paper seeks to help predict the effects of this change by analysing the efficiency of virtually all Chinese banks in the years 1994-2003. Our findings suggest the big four banks are by far the least efficient and foreign banks the most efficient while minority foreign ownership is associated with significantly improved efficiency. We present corroborating robustness checks and offer several credible mechanisms through which minority foreign owners can increase Chinese bank efficiency. These findings suggest that minority foreign ownership of the big four is likely to significantly improve performance.

Suggested Citation

  • Berger, Allen N. & Hasan, Iftekhar & Zhou, Mingming, 2007. "Bank ownership and efficiency in China: what lies ahead in the world's largest nation?," Bank of Finland Research Discussion Papers 16/2007, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp2007_016
    as

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    File URL: https://www.econstor.eu/bitstream/10419/212074/1/bof-rdp2007-016.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    China; foreign banks; efficiency; foreign ownership;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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