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Risk, competition and efficiency in banking: Evidence from China

Yong Tan and Christos Floros

Global Finance Journal, 2018, vol. 35, issue C, 223-236

Abstract: This paper tests the interrelationships among risk, competition, and efficiency in the Chinese banking industry between 2003 and 2013, with an efficiency-adjusted Lerner index and stability inefficiency as the indicators of competition and insolvency risk. The results show that Chinese commercial banks with higher efficiency have higher credit risk and insolvency risk, but lower liquidity risk and capital risk. Greater competition decreases credit risk and insolvency risk, but increases liquidity risk. Credit risk and insolvency risk are significantly and positively related to efficiency, while liquidity risk and capital risk are significantly and negatively related. Finally, lower liquidity risk decreases competition.

Keywords: Competition; Risk; Efficiency; Chinese banking (search for similar items in EconPapers)
JEL-codes: B22 C14 G21 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.gfj.2017.12.001

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