The Impact of Competition on the Risk-Taking Behavior: Evidence from Chinese Banking Industry

2014 ◽  
Author(s):  
Yong Tan
Keyword(s):  
Risk Taking ◽  
Banking Industry ◽  
Risk Taking Behavior ◽  
Chinese Banking Industry ◽  
The Impact ◽  
Chinese Banking

scholarly journals Does competition only impact on insolvency risk? New evidence from the Chinese banking industry

2017 ◽  
Vol 13 (3) ◽  
pp. 332-354 ◽  
Author(s):  
Yong Tan ◽  
John Anchor
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Banking Industry ◽  
Liquidity Risk ◽  
Empirical Literature ◽  
Content Type ◽  
Insolvency Risk ◽  
Chinese Banking Industry ◽  
The Impact ◽  
Chinese Banking

Purpose The purpose of this paper is to investigate the impact of competition on credit risk, liquidity risk, capital risk and insolvency risk in the Chinese banking industry during the period 2003-2013. Design/methodology/approach This study uses a generalized method of moments system estimator to examine the impact of competition on risk. In particular, translog specifications are used to measure the competition and insolvency risk. Findings The results show that greater competition within each bank ownership type (state-owned commercial banks, joint-stock commercial banks and city commercial banks) leads to higher credit risk, higher liquidity risk, higher capital risk, but lower insolvency risk. Originality/value This paper is the first piece of research testing the impact of competition on different types of risk in banking industry and it further contributes to the empirical literature by using a more accurate competition indicator (efficiency-adjusted Lerner index) and a more precise insolvency risk indicator (stability inefficiency).

scholarly journals Risk, competition, efficiency and its interrelationships: evidence from the Chinese banking industry

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yong Tan ◽  
Vincent Charles ◽  
Doha Belimam ◽  
Shabbir Dastgir
Keyword(s):  
Credit Risk ◽  
Banking Sector ◽  
Banking Industry ◽  
Bank Competition ◽  
Content Type ◽  
Frontier Analysis ◽  
Different Types ◽  
Chinese Banking Industry ◽  
The Impact ◽  
Chinese Banking

PurposeThis study investigates the interrelationships between efficiency, competition and risk in the Chinese banking industry.Design/methodology/approachParametric stochastic frontier analysis is used to estimate bank efficiency; the Lerner index is used as the competition indicator; accounting ratios and a translog function are used to measure different types of risk and finally, the three-stage least square estimator is used to investigate the interrelationships.FindingsThe results of this study show that the impact of competition on different types of risk is significant and positive, while there is a significant and positive impact of credit risk, liquidity risk and capital risk on bank competition. In addition, the findings demonstrate that the interrelationships between efficiency and competition are significant and negative. The authors do not find any robust interrelationships between different types of risk and different types of efficiency; the authors find that diversification and higher levels of profitability reduce bank credit risk. The results suggest that a higher developed banking sector reduces the level of bank competition in China.Originality/valueThis is the first piece of research that comprehensively investigates the interrelationships between different types of risk, competition and different efficiencies in China.

Does inside debt alleviate banks' risk taking? Evidence from a quasi-natural experiment in the Chinese banking industry

2019 ◽  
Vol 40 ◽  
pp. 100622 ◽  
Author(s):  
Kebin Deng ◽  
Jing He ◽  
Dongmin Kong ◽  
Jian Zhang
Keyword(s):  
Risk Taking ◽  
Natural Experiment ◽  
Banking Industry ◽  
Inside Debt ◽  
Chinese Banking Industry ◽  
Chinese Banking

scholarly journals Determinants of economic value added (EVA) in Chinese listed banks

2019 ◽  
Vol 27 (4) ◽  
pp. 595-613
Author(s):  
Jie Zhang ◽  
Ahmed Aboud
Keyword(s):  
Performance Evaluation ◽  
Banking Industry ◽  
Evaluation Model ◽  
Value Added ◽  
Measurement Tool ◽  
Content Type ◽  
Performance Evaluation Model ◽  
Chinese Banking Industry ◽  
The Impact ◽  
Chinese Banking

Purpose The purpose of this paper is to examine the determinants of the EVA performance evaluation model for the Chinese banking industry. The authors investigate the impact of six bank-specific factors and corporate governance factors on financial performance. Design/methodology/approach The authors use the ordinary least square regression to examine the determinants of the EVA performance evaluation model for the Chinese banking industry. The findings are generally robust to alternative proxies of performance. Findings The empirical results indicate that credit risk, operational efficiency and the degree of innovation are positively related to banks’ EVA while capital management has a negative impact on it. In addition, although board size and independent directors are not related to the bank’s EVA, from the perspective of the traditional performance evaluation indicators, executive compensation has a positive impact on the bank’s profitability. Research limitations/implications This paper has some limitations. First, due to the large number of adjustments to accounting items are required in the application of EVA when evaluating business performance, some items of the EVA model in this paper have been simplified, which may cause the bank’s EVA value to deviate slightly from the actual situation. Moreover, the sample includes only listed banks, so our results cannot generalize to non-listed banks, such as some small- and medium-sized commercial banks. Originality/value This paper contributes to the limited body of literature concerning the use and the determinants of EVA in emerging markets. The authors construct an EVA model which is suitable for China’s banks and reports comprehensive evidence on the drivers of EVA as a measurement tool.

The Chinese banks’ directors and their risk-taking behavior

2016 ◽  
Vol 10 (2) ◽  
pp. 291-311 ◽  
Author(s):  
Sok-Gee Chan ◽  
Eric H.Y. Koh ◽  
Mohd Zaini Abd Karim
Keyword(s):  
Risk Taking ◽  
Commercial Banks ◽  
Boards Of Directors ◽  
Gender Diversity ◽  
Content Type ◽  
Regulatory Policies ◽  
Wide Range ◽  
Risk Taking Behavior ◽  
The Impact ◽  
Chinese Banking

Purpose The purpose of this paper is to examine the impact of the directors’ socioeconomic backgrounds on the risk-taking behavior of the listed commercial banks in China. Design/methodology/approach The generalized least square method and Arellano and Bover’s (1995) generalized method of moment were used to study the relationship between the directors’ socioeconomic backgrounds and bank risk-taking behavior. The sample studied consists of 16 listed commercial banks in China from 2003 to 2011. Findings It was found that smaller board sizes and higher percentage of independent directors contribute to lower risk-taking. The results also indicate that banks are better off with boards that have gender diversity, government affiliation and higher average age because they enhance problem-solving and market insights facilitate adherence to government or regulatory policies and help reduce the banks’ risks. Research limitations/implications Future studies may consider including non-public-listed banks, pre-2003 data and analyses of the agencies to which the government-affiliated directors are or were attached. Practical implications The paper suggests that corporate governance reform initiatives with closely monitored implementation and phased liberalization contributed toward the banking industry’s resilience. Implications for management include that boards of directors with better quality, sufficient independence, gender diversity, government affiliation and maturity will help reduce risks. Social implications This study may facilitate the decision-making for the bank management and policymakers on the selection of best directors in the Chinese banking sector. The Chinese banking system serves as a plausible role model for consideration, given that four of its banks have now leapfrogged to be among the top ten largest banking institutions after the global financial crisis. Originality/value The study covers a wide range of socioeconomic backgrounds of the board of directors which are crucial in influencing the behavior of the board in banking operations.

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