The impact of financial development and bank characteristics on the operational performance of commercial banks in the Chinese transitional economy

Hsiu‐Ling Wu, Chien-Hsun Chen and Fang‐Ying Shiu

Journal of Economic Studies, 2007, vol. 34, issue 5, 401-414

Abstract: Purpose - This paper attempts to empirically examine the impact of financial development and bank characteristics on the operational performance of commercial banks in the Chinese transitional economy. Design/methodology/approach - Pooled cross‐section (banks) and time‐series data are employed in the empirical estimation, with the sample comprising a total of 14 Chinese banks. The period under consideration extends from 1996‐2004. Fixed effects and random effects models are estimated. Findings - Empirical results exhibit higher levels of moneterization that can translate into better ROA performance for banks. The longer a bank has been in existence, the worse its ROA performance is found to be. Rather than leading to improved profitability, Chinese banks' efforts to develop non‐traditional banking business actually have a negative impact on the ROA. The ROA performance of larger Chinese banks (in terms of assets) is found to be inferior to that of the smaller shareholding commercial banks. Originality/value - Particular emphasis will be placed on the unique characteristics of China's banking industry during this period of institutional transformation.

Keywords: Financial management; Operations management; China; Banking (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:v:34:y:2007:i:5:p:401-414

DOI: 10.1108/01443580710823211

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