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

Ti Hu and Chi Xie

Discrete Dynamics in Nature and Society, 2016, vol. 2016, 1-10

Abstract:

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.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnddns:3695379

DOI: 10.1155/2016/3695379

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