scholarly journals Stability and profitability in the Chinese banking industry: evidence from an auto-regressive-distributed linear specification

2016 ◽  
Vol 13 (4) ◽  
pp. 120-129 ◽  
Author(s):  
Yong Tan ◽  
John Anchor
Keyword(s):  
Commercial Banks ◽  
Banking Sector ◽  
Banking Industry ◽  
Generalized Method Of Moments ◽  
Least Square ◽  
System Gmm ◽  
Auto Regressive ◽  
The Government ◽  
Chinese Banking Industry ◽  
Chinese Banking

The important role played by the Chinese commercial banks in the development of China’s economy has made the government and banking regulatory authority concerned about the performance of these banks.Indeedthe stability of the banking sector has attracted greater attention since the financial crisis of 2007-2009. The principal objective of this study is to investigate the inter-relationships between profitability and stability in the Chinese banking industry. Using a sample of Chinese commercial banks over the period 2003-2013, the study examines the inter-relationships under an auto-regressive-distributed linear model. Both Z-score and stability inefficiency were used as measures of stability, while Return on Assets (ROA) was used as the indicator of profitability. Different types of Generalized Method of Moments (GMM) estimators including difference GMM, one-step system GMM, two-step system GMM as well as two-step robust GMM were used. In order to the check the robustness of the results, alternative econometric techniques were used, such as ordinary least square (OLS) estimator, between effect estimator, as well as fixed effect estimator. The results show that higher insolvency risk/lower bank stability leads to higher profitability of Chinese commercial banks and also that higher profitability leads to higher bank fragility. Keywords: bank profitability, bank risk, China. JEL classification: G21, C23

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.

scholarly journals The profitability of Chinese banks: impacts of risk, competition and efficiency

2017 ◽  
Vol 16 (1) ◽  
pp. 86-105 ◽  
Author(s):  
Yong Tan ◽  
Christos Floros ◽  
John Anchor
Keyword(s):  
Cost Efficiency ◽  
Commercial Banks ◽  
Banking Industry ◽  
Liquidity Risk ◽  
Security Risk ◽  
Bank Profitability ◽  
Content Type ◽  
Insolvency Risk ◽  
Chinese Banking Industry ◽  
Chinese Banking

Purpose This study aims to test the impacts of risk-taking behaviour, competition and cost efficiency on bank profitability in China. Design/methodology/approach A two-step generalized method of moments system estimator is used to examine the impacts of risk, competition and cost efficiency on profitability of a sample of Chinese commercial banks over the period 2003-2013. Findings The paper finds that credit risk, liquidity risk, capital risk, security risk and insolvency risk significantly influence the profitability of Chinese commercial banks. To be more specific, credit risk is significantly and negatively related to bank profitability; liquidity risk is significantly and positively related to return on assets (ROA) and net interest margin (NIM) but negatively related to return on equity (ROE); capital risk has a significant and negative impact on ROA and NIM but a positive impact on ROE; there is a significant and negative impact of security risk on bank profitability (ROA and NIM). It is found that Chinese commercial banks with higher levels of insolvency risk have higher profitability (ROA and ROE). Finally, higher competition leads to lower profitability in the Chinese banking industry, and Chinese commercial banks with higher levels of cost efficiency have lower ROA. In other words, the structure–conduct–performance paradigm rather than the efficient–structure paradigm holds in the Chinese banking industry. Originality/value This is the first paper to investigate the impact of different types of risk, including credit risk, liquidity risk, capital risk, security risk and insolvency risk, on bank profitability. This is the first study which uses more accurate measurements of efficiency and competition compared to previous Chinese banking profitability literature and which tests their impact on bank profitability. The findings not only provide a general picture on the risk, efficiency and competition conditions in the Chinese banking industry, but also give valuable information to the Chinese Government and to the banking regulatory authorities to make relevant policies.

scholarly journals Non-Traditional Systemic Risk Contagion within the Chinese Banking Industry

2021 ◽  
Vol 13 (14) ◽  
pp. 7954
Author(s):  
Tonmoy Choudhury ◽  
Simone Scagnelli ◽  
Jaime Yong ◽  
Zhaoyong Zhang
Keyword(s):  
Systemic Risk ◽  
Banking Sector ◽  
Banking Industry ◽  
Risk Measures ◽  
Banking System ◽  
Policy Implications ◽  
System Stability ◽  
Chinese Banking Industry ◽  
Contagion Risk ◽  
Chinese Banking

Systemic risk contagion is a key issue in the banking sector in maintaining financial system stability. This study is among the first few to use three different distance-to-risk measures to empirically assess the domestic interbank linkages and systemic contagion risk of the Chinese banking industry, by using bivariate dynamic conditional correlation GARCH model on data collected from eight prominent Chinese banks for the period 2006–2018. The results show a relatively high correlation among almost all the banks, suggesting an interconnectedness among the banks. We found evidence that the banking system is exposed to significant domestic contagion risks arising from systemic defaults. Given that Chinese markets deliver weak signals of forthcoming stress in banking sectors, new policy intervention is crucial to resolve the hidden stress in the system. The results have important policy implications and will provide scholars and policymakers further insight into the risk contagion originating from interbank networks.

scholarly journals Competition, Innovation, Risk-Taking, and Profitability in the Chinese Banking Sector: An Empirical Analysis Based on Structural Equation Modeling

2016 ◽  
Vol 2016 ◽  
pp. 1-10 ◽  
Author(s):  
Ti Hu ◽  
Chi Xie
Keyword(s):  
Structural Equation Modeling ◽  
Risk Taking ◽  
Structural Equation ◽  
Banking Sector ◽  
Banking Industry ◽  
Market Competition ◽  
Equation Modeling ◽  
Chinese Banking Industry ◽  
New Perspective ◽  
Chinese Banking

We introduce a new perspective to systematically investigate the cause-and-effect relationships among competition, innovation, risk-taking, and profitability in the Chinese banking industry. Our hypotheses are tested by the structural equation modeling (SEM), and the empirical results show that (i) risk-taking is positively related to profitability; (ii) innovation positively affects both risk-taking and profitability, and the effect of innovation on profitability works both directly and indirectly; (iii) competition negatively affects risk-taking but positively affects both innovation and profitability, and the effects of competition on risk-taking and profitability work both directly and indirectly; (iv) there is a cascading relationship among market competition and bank innovation, risk-taking, and profitability.

Efficiency in China’s Banking Sector: A Comparative Analysis of Pre- and Post-Basel II Eras

2021 ◽  
pp. 2150010
Author(s):  
Sunil Mohanty ◽  
Hong-Jen Lin
Keyword(s):  
Commercial Banks ◽  
Banking Sector ◽  
Banking Industry ◽  
Basel Ii ◽  
Capital Adequacy ◽  
Basel Iii ◽  
Profit Efficiency ◽  
Tier 1 ◽  
Big Four ◽  
Chinese Banking

This study investigates the effects of Basel II and Basel III capital adequacy rules and the regulatory framework adopted by Chinese banking regulators on the efficiency of the banking sector in China during the post-Basel II era (2007–2017) and compares the results with that of the pre-Basel II era (1996–2006). The study finds that both cost and profit efficiency of the banking industry have improved significantly from the pre-Basel II era (1996–2006) to the post-Basel II era (2007–2017). Subperiod analyses show that the risk-based capital ratio (Tier 1 capital ratio) is significantly positively associated with profit efficiency during both pre- and post-Basel II eras. Overall, the “Big Four” national banks and regional commercial banks signal higher profit efficiency during the post-Basel II era.

scholarly journals Forign Ownership and Bank Performance: Evidence From Indonesia

2017 ◽  
Vol 8 (1) ◽  
Author(s):  
Amarilla Hapsari ◽  
Rofikoh Rokhim
Keyword(s):  
Commercial Banks ◽  
Banking Sector ◽  
Banking Industry ◽  
Positive Impact ◽  
Bank Performance ◽  
Industrialized Countries ◽  
Foreign Investors ◽  
Banking Market ◽  
The Government ◽  
The Impact

The main objective of this study is to examine the impact of foreign entry on the domestic bank-ing market’s profitability and overhead costs as financial sector FDI is a relatively new phenom-enon and typically takes the form of banks in industrialized countries establishing branches and facilities in developing countries. A panel data covering the period from 2000 to 2012 is set based on the financial data from 82 commercial banks, which operated in Indonesia as of De-cember 2012 and represented 92 percent of the commercial banks’ total assets. The results of this study are expected to complement the existing collection of studies on the foreign penetra-tion in the Indonesian banking industry, as to date there has been limited study of the impact of foreign ownership on bank performance in Indonesia. From a policy perspective, this study draws some conclusions which clarify the impacts of foreign penetration on banking industry. The government should continue to open the banking market up to foreign investors if they are proven to bring a positive impact, and should act conversely if they are proven to have an adverse impact on the local banking sector.

Measurement of Vulnerability of Financial Portfolio of Sharia Commercial Banks by Cardona Method

2017 ◽  
Vol 9 (2) ◽  
pp. 109
Author(s):  
Paulina Harun ◽  
Atman Poerwokoesoemo
Keyword(s):  
Commercial Banks ◽  
Quantitative Research ◽  
Banking Sector ◽  
Banking Industry ◽  
Policy Makers ◽  
Factors Affecting ◽  
Section Data ◽  
Initial Stage ◽  
The Face ◽  
Asset Portfolio

his study aims to: (1) to know and analyze the extent of volatility (vulnerability) of sharia banking industry in Indonesia in the face of competition (2) to know and analyze factors affecting vulnerability of sharia commercial banks; (3) to know and analyze the extent of sustainable development of sharia banking industry to Indonesia's economic development.The research conducted to measure the vulnerability (volatility) of proto folio of syariah bank using observation period 2015, and the data used is cross section data. The research design used in this research is quantitative research, using asset dimension (asset portfolio, liability portfolio, equity portfolio) and stressor (pressure, including: credit risk, market risk, and liquidity risk).The activity plan of this research is: in the initial stage of conducting theoretical study related to the vulnerability related to banking especially BUS; The next step is to determine the asset and stressor dimensions associated with the BUS; Further determine the indicators related to assets and stressors; The next step performs calculations to determine the index of each BUS as well as the dimensions that affect the vulnerabilities faced by each BUS.Target expected outcomes can be generated from this research is: for the object of research (BUS) provide a solution for BUS to deal with and overcome the vulnerabilities encountered and policies that must be done. For policy makers, the results of this study are expected to provide input in decision-making and other policies.Measurement of vulnerability to be performed related to banking operations in the face of competition and the continuity of BUS in Indonesia. The outcomes of this study are expected to be included in Bank Indonesia journals, the selection of this journal is based on studies conducted in the banking sector, especially BUS in Indonesia.

A combination model for operational risk estimation in a Chinese banking industry case

2012 ◽  
Vol 7 (2) ◽  
pp. 17-39 ◽  
Author(s):  
Jichuang Feng ◽  
Jianping Li ◽  
Lijun Gao ◽  
Zhongsheng Hua
Keyword(s):  
Banking Industry ◽  
Risk Estimation ◽  
Operational Risk ◽  
Combination Model ◽  
Chinese Banking Industry ◽  
Chinese Banking
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