Does high-speed rail boost local bank performance? Evidence from China

Huiyu Wen, Hui Wang, Danni Zhao and Haoyu Gao

International Review of Economics & Finance, 2024, vol. 93, issue PB, 641-658

Abstract: This paper investigates whether and how high-speed rail (HSR) construction affects local bank performance. Using the difference-in-differences method, we find that the city commercial banks (CCBs) significantly experience an overall decrease in ROA after HSR is introduced in their headquarters cities. Mechanism analyses suggests that the HSR-driven city connectivity imposes the local CCBs on the intensified banking competition related to freer capital flows, and improves bank governance associated with information flows. HSR exerts more pronounced impacts under higher financial liberalization. The findings are robust to the endogeneity concerns. We highlight the indispensable role of transport infrastructure in banking development.

Keywords: Bank performance; City commercial bank; High-speed rail; Bank competition; Information flows (search for similar items in EconPapers)
JEL-codes: G21 H54 R11 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:93:y:2024:i:pb:p:641-658

DOI: 10.1016/j.iref.2024.03.081

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