The Impacts of Competition and Risk on Profitability in China: Evidence from Boone Indicator and Stability Inefficiency

58 Pages Posted: 4 Nov 2017

See all articles by Yong Tan

Yong Tan

University of Huddersfield - Business School

Date Written: February 11, 2017

Abstract

This paper tests the competition in different banking markets in China (deposit market, loan market, and non-interest income market) using a sample of Chinese commercial banks over the period 2003-2013 and further examines the impact of competition on bank profitability while controlling for different types of risk. The results show that non-interest income market in the Chinese banking industry has a higher level of competition compared to the other two markets during early years of the examined period. The findings further report that in a higher competitive deposit market, Chinese commercial banks have lower levels of profitability. Finally, it is suggested the bank profitability in China is significantly affected by liquidity risk.

Keywords: Bank profitability, Bank competition, GMM, China

JEL Classification: G21, C23

Suggested Citation

Tan, Yong, The Impacts of Competition and Risk on Profitability in China: Evidence from Boone Indicator and Stability Inefficiency (February 11, 2017). Available at SSRN: https://ssrn.com/abstract=3063943 or http://dx.doi.org/10.2139/ssrn.3063943

Yong Tan (Contact Author)

University of Huddersfield - Business School ( email )

Queensgate
Huddersfield, HD1 3DH
United Kingdom
+44(0)148447 3578 (Phone)

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