State Aid and Competition in Banking: The Case of China in the Late Nineties

Xiaoqiang Cheng and Patrick Van Cayseele

Working Papers from eSocialSciences

Abstract: A reduced form model where banks can pursue other goals than profit maximization is presented. This allows us to test for behavioral changes of banks over time. This model provides a framework to evaluate whether moral hazard issues may plague banks receiving state aid, which concerns greatly the recent debate on government intervention in financial markets during the global financial crisis in 2008. To test the impact of state aid, a natural experiment in the banking sector in China in the 1990s is examined. The possibility of receiving state aid triggers moral hazard prone conduct cannot be rejected.

Keywords: banks; moral hazard; Europe; history; banking; crisis; commercial banks; Panzar –Rosse Model; monopoly environment; revenue maximization; output maximization; revenue elasticity; United Statesgovernment intervention; china; financial markets (search for similar items in EconPapers)
Date: 2010-02
New Economics Papers: this item is included in nep-ban and nep-tra
Note: Institutional Papers
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.esocialsciences.org/Download/repecDownl ... &AId=2435&fref=repec

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ess:wpaper:id:2435

Access Statistics for this paper

More papers in Working Papers from eSocialSciences
Bibliographic data for series maintained by Padma Prakash (padmaprakash@esocialsciences.com).