What explains the low profitability of Chinese banks?

Alicia García-Herrero, Sergio Gavilá and Daniel Santabárbara
Authors registered in the RePEc Author Service: Alicia Garcia Herrero

Journal of Banking & Finance, 2009, vol. 33, issue 11, 2080-2092

Abstract: This paper analyzes empirically what explains the low profitability of Chinese banks for the period 1997-2004. We find that better capitalized banks tend to be more profitable. The same is true for banks with a relatively larger share of deposits and for more X-efficient banks. In addition, a less concentrated banking system increases bank profitability, which basically reflects that the four state-owned commercial banks - China's largest banks - have been the main drag for system's profitability. We find the same negative influence for China's development banks (so-called Policy Banks), which are fully state-owned. Instead, more market-oriented banks, such as joint-stock commercial banks, tend to be more profitable, which again points to the influence of government intervention in explaining bank performance in China. These findings should not come as a surprise for a banking system which has long been functioning as a mechanism for transferring huge savings to meet public policy goals.

Keywords: China; Bank; profitability; Bank; reform (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (111)

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Working Paper: What explains the low profitability of Chinese banks? (2009)
Working Paper: What explains the low profitability of Chinese banks? (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:33:y:2009:i:11:p:2080-2092

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