Asia-Pacific Journal of Business (아태비즈니스연구)

KNU The Institute of Management & Economy Research (강원대학교 경영경제연구소)
권호 표지
DOI QR코드

DOI QR Code

The Effect of Market Structure on the Performance of China's Banking Industry: Focusing on the Differences between Nation-Owned Banks and Joint-Stock Banks

개혁개방 이후 중국 은행산업의 구조와 성과: 국유은행과 주식제 은행의 차이를 중심으로

  • Ze-Hui Liu (Department of Economics, Korea University) ;
  • Dong-Ook Choi (Department of Economics and Finance, Sangmyung University)
  • 육택휘 (고려대학교 경제학과) ;
  • 최동욱 (상명대학교 경제금융학부)
  • Received : 2023.11.30
  • Accepted : 2023.12.22
  • Published : 2023.12.31
Download PDF
⟨ Previous Next ⟩

Abstract

Purpose - This study applies the traditional Structure-Conduct-Performance (SCP) model from industrial organization theory to investigate the relationship between market structure and performance in China's banking industry. Design/methodology/approach - For analysis, financial data from the People's Bank of China's "China Financial Stability Report" and financial reports of 6 state-owned banks and 11 joint-stock banks for the period 2010 to 2021 were collected to create a balanced panel dataset. The study employs panel fixed-effects regression analysis to assess the impact of changes in market structure and ownership structure on performance variables including return on asset, profitability, costs, and non-performing loan ratios. Findings - Empirical findings highlight significant differences in the effects of market structure between state-owned and joint-stock banks. Notably, increased market competition positively correlates with higher profits for state-owned banks and with lower costs for joint-stock banks. Research implications or Originality - State-owned banks demonstrate larger scale and stability, yet they struggle to respond effectively to market shifts. Conversely, joint-stock banks face challenges in raising profitability against competitive pressures. Additionally, the study emphasizes the importance for Chinese banks to strengthen risk management due to the increase of non-performing loans with competition. The results provide insights into reform policies for Chinese banks regarding the involvement of private sector in the context of market liberalization process in China.

Keywords

References

  1. 구웨이지에, 이순희. (2022), "이사회 소유지분과 독립성이 중국 상장기업성과에 미치는 영향". 아태비즈니스연구, 13(1), 89-102.
  2. Zhao, H. (2021), "Only When We Dare to Let Go Can We Innovate", China Bank and Insurance News, July 26, 2021. Available from http://www.cbimc.cn/content/2021-09/27/content_450639.html.
  3. Bain, J. S. (1951), "Relation of Profit Rate to Industry Concentration: American Manufacturing, 1936- 1940". The Quarterly Journal of Economics, 65(3), 293-324. https://doi.org/10.2307/1882217
  4. De Jonghe, O., and R., Vander-Vennet (2005), "Competition Versus Agency Costs: An Analysis of Charter Values in European Banking", Working Paper, Ghent University.
  5. Elfeituri, H. (2018), "Market Concentration, Foreign Ownership and Determinants of Bank Financial Performance: Evidence from MENA Countries", Corporate Ownership and Control, 15(3), 9-22. https://doi.org/10.22495/cocv15i3art1
  6. Liu X. (2003), "The Structure of Property Rights in the Chinese Transition Economy", Economic Research Journal, (1), 21-29.
  7. Man Y, Y. Yang and W. Sun (2015), "Commercial Bank: Effciency, Market Structure and Performance Relationship", Journal of Applied Statistics and Management, (01), 125-141.
  8. Peng H. (2010), The Empirical Study on the Market Structure of Chinese Banking (Doctoral Dissertation), Chengdu: Southwestern University of Finance and Economics.
  9. Pilloff, S. J., and S. A. Rhoades (2002), "Structure and Profitability in Banking Markets", Review of Industrial Organization, 20, 81-98.
  10. Ruan B. (1996), "A Comparative Study of China's Nation-owned Banks and Joint-stock Banks", Rural Finance Research, (09).
  11. Sahul Hamid, F. (2017), "The Effect of Market Structure on Banks' Profitability and Stability: Evidence from ASEAN-5 Countries", International Economic Journal, 31(4), 578-598. https://doi.org/10.1080/10168737.2017.1408668
  12. Wei L. (2013), Analysis of Chinese Banking in Market Structure and Competitiveness Based on the SCP Paradigm (Master's Thesis), Fuzhou: Fujian Normal University.
  13. Xia X. (2013), The SCP Frame Analysis on China's Banking industry - the Positive Research Based on the 14 Commercial Banks (Master's Thesis), Chengdu: Southwestern University of Finance and Economics.
  14. Yang H. (2018), Research On Causes Of Non-Performing Loans In Joint-Stock Commercial Banks Based On The Perspective Of Loan Concentration (Master's Thesis), Haikou: Henan University.
  15. Yang Q. (2016), Resolution of China's Non-Performing Loans in the Context of Economic Transition (Master's Thesis), Shanghai: Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University.
  16. Zhang W. (2009), "Industrial Scale Capital Structure and Industrial Performance - Demonstrational Analysis of Our Country's industry", Journal of Lanzhou Commercial College, 25(1), 71-75.