Institutional quality, banking marketization, and bank stability: Evidence from China

Xiaohui Hou and Qing Wang

Economic Systems, 2016, vol. 40, issue 4, 539-551

Abstract: This paper investigates the relationship between banking marketization and bank stability across different levels of institutional quality in China. Our results suggest that banking marketization does not inevitably have a negative impact on bank stability. One of the two banking marketization indicators, namely the proportion of deposits taken by non-state-owned commercial banks to total deposits, has a significant positive impact on bank stability; in contrast, the other indicator, the proportion of loans issued to non-state-owned hybrid-sector firms to total loans in China’s banking sector, is negatively associated with bank stability. Furthermore, an improvement of the institutional quality can reduce the adverse influence of banking marketization on bank stability on the whole.

Keywords: Banking marketization; Institutional quality; Bank stability; China (search for similar items in EconPapers)
JEL-codes: G21 G28 P48 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:40:y:2016:i:4:p:539-551

DOI: 10.1016/j.ecosys.2016.01.003

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