EconPapers    
Economics at your fingertips  
 

Risk preference and efficiency in Chinese banking

Ning Zhu, Yanrui Wu, Bing Wang and Zhiqian Yu

China Economic Review, 2019, vol. 53, issue C, 324-341

Abstract: This paper aims to measure banking efficiency by considering risk preferences in 49 Chinese commercial banks during the period of 2004–2012. It adopts a method which allows for endogenous classification of three risk preferences, namely the conservative, moderate and aggressive risk modes, by changing direction vectors. Banking efficiency is measured on the basis of optimal risk preference. The findings show that the moderate risk preference is the most appropriate strategy to achieve technical efficiency in the Chinese banking sector. However, the aggressive risk preference involving low risk costs, compulsory credit spreads and scale expansion played a critical role in promoting the development of Chinese banking sector, but its effect decreased rapidly. The findings also imply that the average technical efficiency scores of joint stock commercial banks and city commercial banks were higher than those of state-owned commercial banks under the optimal risk preference, and that the measured efficiency mainly shows a trend of improvement over time.

Keywords: Risk preference; Technical efficiency; Directional distance function; Chinese banks (search for similar items in EconPapers)
JEL-codes: C61 D24 G21 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1043951X18301548
Full text for ScienceDirect subscribers only

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:eee:chieco:v:53:y:2019:i:c:p:324-341

Access Statistics for this article

China Economic Review is currently edited by B.M. Fleisher, K. X. D. Huang, M.E. Lovely, Y. Wen, X. Zhang and X. Zhu

More articles in China Economic Review from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-06-12
Handle: RePEc:eee:chieco:v:53:y:2019:i:c:p:324-341