Banking reforms, performance and risk in China

He, L., Chen, L. and Liu, F. H. (2017) Banking reforms, performance and risk in China. Applied Economics, 49(40), pp. 3995-4012. (doi: 10.1080/00036846.2016.1273501)

Abstract

We investigate the impact of the banking reform started from 2005 on ownership structures in China on commercial banks’ profitability, efficiency and risk over the period 2000–2012, providing comprehensive evidence on the impact of banking reform in China. We find that banks on average tend to have higher profitability, lower risk and lower efficiency after the reforms, and the results are robust with our difference-in-difference approach. Our results also show that the Big 5 state-owned banks (SOCB) underperform banks with other types of ownership when risk is measured by non-performing loans (NPLs) over the entire study period but tend to have fewer NPLs than other banks during the post-reform period. Our results provide some supporting evidence on the ongoing banking reforms in China, suggesting that attracting strategic foreign investors and listing SOCBs on stock exchanges appear to be effective ways to help SOCBs deal with the problem of NPLs and manage their risk.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Liu, Professor Frank
• Authors: He, L., Chen, L., and Liu, F. H.
• College/School: College of Social Sciences > Adam Smith Business School > Accounting and Finance
• Journal Name: Applied Economics
• Publisher: Taylor & Francis
• ISSN: 0003-6846
• ISSN (Online): 1466-4283
• Published Online: 06 January 2017

Copyright Holders

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• First Published: First published in Applied Economics 49(40):3995-4012
• Publisher Policy: Reproduced in accordance with the copyright policy of the publisher