Abstract
In this paper, we examine how the shadow banking activities of Chinese commercial banks affect their cost efficiency. Furthermore, we investigate whether the relation between shadow banking activities and the bank cost efficiency changes across heterogeneous types of government political intervention in banks. We find that the growth of shadow banking activities has a significantly positive effect on the cost efficiency of Chinese commercial banks. In addition, evidence suggests that political intervention has detrimental effects on bank cost efficiency, which will weaken or dominate the positive relation between the growth of shadow banking activities and bank cost efficiency.
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