Risk, Competition and Efficiency in the Chinese Banking Industry: Evidence from Stochastic Frontier Analysis and Three-Stage Least Square Estimator

43 Pages Posted: 6 Nov 2017 Last revised: 27 Jul 2020

See all articles by Yong Tan

Yong Tan

University of Huddersfield - Business School

Date Written: September 5, 2016

Abstract

Using a sample of Chinese commercial banks over the period 2003-2013, this paper tests the interrelationships between risk, competition and efficiency in the Chinese banking industry under a three-stage least square estimator. The paper is the first study comprehensively examining different types of risk-taking behaviours of Chinese commercial banks. The findings suggest that there are significant interrelationships between credit risk, liquidity risk, capital risk and efficiencies of Chinese commercial banks. In addition, it is found that higher levels of competition lead to lower cost and revenue efficiencies and there is a significant and positive impact of credit risk on bank competition. The results provide policy implications to Chinese government and banking regulatory authorities

Keywords: Risk, Competition, Efficiency, Chinese Banking, SUR

JEL Classification: G21, C33, C14

Suggested Citation

Tan, Yong, Risk, Competition and Efficiency in the Chinese Banking Industry: Evidence from Stochastic Frontier Analysis and Three-Stage Least Square Estimator (September 5, 2016). Available at SSRN: https://ssrn.com/abstract=3064322 or http://dx.doi.org/10.2139/ssrn.3064322

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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