Chinese Banks Research Articles

Executive compensation, equity structure and risk-taking in Chinese banks

Executive compensation, equity structure and risk-taking in Chinese banks

Temporal and spatial heterogeneity of resource misallocation in Chinese banks and its influential factors

This study measures the degree of resource misallocation in Chinese banks and investigates its temporal and spatial variations. Our findings suggest that resource misallocation is prevalent in Chinese banks. The primary source of this misallocation is inter-regional disparities, but both regional imbalances and the misallocation of resources have decreased over time. Multiple factors contribute to the heterogeneity of resource misallocation within banks. While financial development, human capital, and ownership structures exacerbate the misallocation, fiscal decentralization, financial openness, industrial structure, and urbanization levels alleviate it. However, the intensity and direction of these effects differ across regions, leading to visible spatial disparities.

Bank tail risk in China

AbstractIn this study, we investigate the tail dependency between bank stocks in China and 35 common risk factors. We measure univariate and multivariate conditional tail risk probabilities. The evidence indicates that tail events from risk factors in the banking, security trading, real estate, and energy industries have the largest effects on the realization of extreme returns from Chinese bank stocks. The univariate conditional tail risk is considerably higher than the unconditional tail risk. The impact of multiple tail events from several risk factors occurring simultaneously is much stronger than tail events from one single risk factor. In general, there is a stronger cross‐market tail linkage between emerging market risk factors and bank stocks in China when compared with developed market risk factors. However, the cross‐market tail linkage between developed market risk factors and bank stocks in China rose sharply during the 2008 financial crisis.

The impact of foreign participation on risk-taking in Chinese commercial banks: The co-governance role of equity checks and foreign supervision

This study examines how foreign equity participation affects the risk-taking of commercial banks using Chinese bank-level data from 2012 to 2020. The results indicate that foreign equity participation significantly reduces bank risk, and there is a U-shaped relationship between the foreign shareholding ratio and bank risk. Mechanism analysis reveals that augmenting foreign ownership strengthens shareholder equilibrium and boosts the presence of foreign directors. This structure enhances dual governance mechanisms, lowering the risk in banking activities. Considering that confounding factors affecting mediator and dependent variables can cause bias in coefficient estimation, we used machine learning methods to determine the best predictive factors affecting bank risk-taking. We indirectly verified the theoretically driven empirical model by evaluating more explanatory variables and selecting subsets of explanatory variables. In addition, we find that governance enhancements are particularly pronounced in Chinese banks, characterized by smaller scale and less income diversification. Additionally, foreign ownership significantly impacts banks' market risk more than credit and operational risks. Our results imply that China's financial regulatory authorities need to shift the focus of supervision to examining foreign shareholding ratio and corporate governance ability.

Stability and economic performances in the banking industry: The case of China

We estimate stability performances in the Chinese banking industry over the 2007–2017 period using four risk indicators under nonparametric modelling. We are the first to calculate the risk indicator shadow prices, and we use a new way of studying the relationship between stability and economic performance. In particular, we reexamine stability performances when banks achieve their best economic performances. This questions the existence of stability rents, which form a prime reason for the banking authority to consider economic performance. Finally, we verify whether ownership has an impact on our results and investigate the role of the interest rate liberalization reforms.

Investigating the temporal and spatial evolution of bank performance and its impact pathways in the context of financial technology development

Financial technology transforms humans and businesses as globalization and the digital economy accelerate. This affects bank performance. Thus, studying whether financial technology affects bank performance is crucial to enhancing living standards and business development. This article examines the development and interaction between financial technology and bank performance from 2012 to 2021 using standard deviation ellipses, kernel density estimation, Moran's index, and spatial econometric models. The research found that (1) financial technology development improves regional bank performance. In contrast, control variables like economic development, urbanization, tax burden, capital adequacy ratio, net interest margin, and loan-to-deposit ratio also affect bank performance. (2) From 2012 to 2021, Chinese bank performance initially grew, then declined, while financial technology declined slowly and improved rapidly. Financial technology and bank performance development were highest in the eastern coastal regions and lowest in the northwest and northeast. (3) China's financial technology and bank performance had high-high or low-low spatial agglomeration. (4) Financial technology and control variables have a spatial spillover effect on bank performance, so their development in one region can affect neighboring regions. This article provides recommendations for governments and banks based on these findings.

An experimental study on psychosocial Interventions for Chinese bank employees during the COVID-19: a cognitive-behavioral therapy based on Confucian cultivation ethics

An experimental study on psychosocial Interventions for Chinese bank employees during the COVID-19: a cognitive-behavioral therapy based on Confucian cultivation ethics

Assessing the Effects of Trade-Related Exchange Rate Fluctuations on Credit Availability and Financial Stability in China

The recent trade wars between China, the United States, and Australia have significantly impacted global economic dynamics. As China relies heavily on international trade, these conflicts have led to fluctuations in the Chinese yuan (CNY), straining financial stability. This study aims to analyze the influence of this volatility in the exchange rate on China’s credit market, focusing on how fluctuations in the CNY against the U.S. dollar and Australian dollar have influenced credit availability, loan demand, and overall financial stability. The study employs a mixed-methods approach, combining an autoregressive distributed lag (ARDL) model. The findings reveal a strong correlation between exchange rate volatility and credit market conditions, with the depreciation of the CNY during trade tensions leading to tighter credit conditions and higher borrowing costs. Chinese banks responded by tightening lending standards and increasing interest rates, which helped mitigate some of the adverse effects. However, the ongoing nature of trade tensions underscores the need for continued vigilance and adaptive strategies, including economic diversification, strengthening financial infrastructure, and enhancing policy coordination to ensure long-term resilience and stability in China’s financial system.

Operational Risk Measurement: An Optimal Timescale Selection Method Based on Information Entropy

Operational risk capital is typically allocated on an annual timescale in extant research, while ignoring that the dependence between operational risk events may differ on different timescales, such as semi-annual and quarterly. This study examines whether operational risk dependence structures differ on multiple timescales and proposes an optimal timescale selection method based on information entropy theory to obtain more reasonable operational risk measurement results. Different dependence modeling methods, including linear correlation and copula functions, are employed to analyze the dependence structures on multiple timescales. The information changes between different timescales are calculated to select the optimal timescale. The empirical analysis is based on 2,024 operational risk events from 1994 to 2017 in the Chinese Operational Loss Database (COLD), which is one of the largest external operational risk datasets for the Chinese banking industry. The results reveal significant differences in operational risk dependence at different timescales which affect the operational risk measurement results. Crucially, the quarterly timescale should be considered for more reasonable measurements. The findings provide important insights for considering a more reasonable allocation of operational risk capital under multiple timescale dependence.

Elevating Customer Relationship Management in Chinese Banking: A Synergy of Information Technology and Strategic Practices

Elevating Customer Relationship Management in Chinese Banking: A Synergy of Information Technology and Strategic Practices

The Impact of Global Value Chains on the International Competitiveness of Chinese Banks: A Quantitative Analysis

The Impact of Global Value Chains on the International Competitiveness of Chinese Banks: A Quantitative Analysis

Adapting to Change: The Evolution of the Basel Accords and the Chinese Banking Sector's Response

Adapting to Change: The Evolution of the Basel Accords and the Chinese Banking Sector's Response

Traditional Banking Evolution in China Amidst the Fintech Revolution

This paper aims to investigate how the evolution of fintech could impact the traditional banking industry in China by reviewing the existing research. It provides a brief introduction to Chinese banks, outlining their structures, and functions against the background of the development in the Chinese financial market. The paper also discusses how fintech could potentially interact with Chinese banks and the possible changes in bank financing systems, clearing systems, and credit rating systems in light of the fintech revolution. The final section of the report provides a summary of the accomplishments of fintech in the banking industry. It also explains the reasons behind the fintech revolution in the banking sector and suggests practical solutions for traditional Chinese banks to integrate fintech into their regular operations. This integration can help improve the efficiency of financing, clearing, and credit rating systems by utilizing fintech techniques already in use such as P2P lending, blockchain, and artificial intelligence (AI).

How to deter earnings manipulation in Chinese banks? A study from the combined effects of corporate governance, enterprise resources, and supervisory mechanisms

AbstractThe study proposes methods for deterring earnings manipulation in Chinese commercial banks, recognizing it as an ongoing problem with the potential to destabilize investors and financial markets. The increasing integration of the global financial system has heightened the importance of addressing this issue, given the systemic risk posed by large individual financial institutions. Utilizing the Fuzzy Set Qualitative Comparative Analysis method (fsQCA) on 139 Chinese commercial banks in 2021, the paper explores factors influencing banks' earnings manipulation behavior. The study reveals several key findings: (1) Factors associated with reducing the likelihood of earnings manipulation in commercial banks are diverse and multifaceted. (2) Multiple paths exist to achieve earnings manipulation, categorized into Resource‐guided, Corporate Governance, Resource and Supervisory Mechanism, Supervisory Mechanism, and Corporate Governance as the main mechanism. Among these, the Supervisory Mechanism exhibits the highest consistency. (3) Hiring “Big Four” accounting firms as auditors emerges as a significant deterrent against earnings manipulation in commercial banks. (4) Banks with powerful major shareholders affiliated with the government or ample resources are effective in deterring earnings manipulation. These two factors are complementary, while a bank's growth prospects and industrial competition serve as substitute factors.

Bail-ins and market discipline: Evidence from China

We examine the effect of bail-in event on the market discipline for Chinese banks, exploiting the bankruptcy of Baoshang Bank and subsequent write-down as a quasi-natural experiment. Using the bond data of banks from 2016 to 2021, we find that the bail-in event leads to higher issuance spreads for bonds with write-down clauses. This effect is more pronounced for bonds issued by small banks, and banks in regions with weaker local fiscal strength. A higher proportion of CoCo bond in the bank capital increase the risk-taking of small banks. CoCo bond issuance reduces the spread of Negotiable Certificates of Deposit (NCDs) after the event due to a stronger buffer effect. We underscore the role of bail-in event in imposing market discipline in an emerging economy like China.

Research on the Role of Investment Banks in the China’s IPO Market

Investment banks are essential players in today's dynamic capital market, serving as intermediaries that facilitate a wide range of financial activities crucial for economic growth and development. These activities encompass venture capital, project financing, mergers and acquisitions, corporate restructuring, securities issuance, and investment analysis. Investment banks must establish robust developmental frameworks and adapt to changing industry dynamics to remain effective and resilient in the face of evolving economic and financial landscapes. This research explores the role played by investment banks in the Chinese Initial Public Offering (IPO) market while considering the nation's historical context. China's financial evolution has been marked by unique historical events and economic reforms, which have significantly influenced its IPO market and the involvement of investment banks. Examining the interplay between these factors is vital for understanding the broader dynamics of the global financial system. It provides valuable insights into the strategies and adaptations required for investment banks to thrive in this complex environment. This study aims to contribute to the existing body of knowledge and inform industry stakeholders, policymakers, and investors about the intricacies of investment banking in China's IPO market.

A study on Overseas Chinese bank in Indonesia - Focusing on Bank Central Asia

This study seeks to comprehensively analyze the historical development and current status of the Indonesian banking industry. Furthermore, it aims to delve into the origins, developmental trajectory, and current standing of Overseas Chinese Bank Central Asia, a pivotal player in the Indonesian banking landscape, while evaluating its competitive edge. Drawing from this examination, practical implications and strategic developmental approaches will be proposed. Through an extensive review of literature, we will scrutinize the evolution and present state of Indonesia's banking sector, along with the establishment, growth history, and current position of Bank Central Asia. Utilizing Porter's Five Forces analysis model, we will assess the competitive dynamics of Bank Central Asia, complemented by a SWOT analysis to scrutinize its internal and external environments. Despite its inception by overseas Chinese, Bank Central Asia has emerged as a frontrunner in Indonesia's financial realm. While it exhibits deficiencies in digital transformation, product innovation, customer experience, risk management, and collaborative innovation, it boasts strengths in network expansion, talent cultivation, and system enhancement for promotion and development. Leveraging these competitive advantages, Bank Central Asia has sustained its leading position within the Indonesian financial landscape. To maintain this competitive edge, Bank Central Asia must astutely navigate market trends, competitor actions, and regulatory shifts, making informed decisions and flexibly adjusting strategies as needed. Leveraging its external networks and internal strengths, Bank Central Asia has upheld a sterling reputation and achieved sustainable growth. The exploration of these Overseas Chinese banks not only sheds light on the intricacies of the Southeast Asian economies but also offers valuable insights into the dynamics of global banking and finance.

Сan citizen Internet banking in China become a champion in the digital transformation era?

This study aims to make theoretical and practical contributions by addressing stagnation in the context of digital transformation (DX) and proposing specific measures. Focusing on the banking industry’s skilled response to rapid changes to maintain and improve competitiveness, this study employs quantitative methods to investigate the expectations and assessments of Chinese financial service users regarding Internet banking. With a clear objective, this study seeks to contribute theoretically and practically by addressing stagnation in DX. Specifically, it focuses on the banking industry’s response to rapid changes, employing quantitative methods to assess and understand Chinese financial service users’ expectations of Internet banking. The results reveal that the prevalent use of payment services through mobile applications has significantly expanded the scope of financial services among citizens. Key factors driving innovation in the financial industry through fintech include close communication with consumers, service enhancement and sophistication and ensuring reliability. Privacy and the ethical use of personal information have been found to function as an indirect pathway that plays a vital role in socio-economic activities, acting as a critical element for the future development of the financial industry. These findings provide actionable insights for fostering innovation and development in the financial sector. The uniqueness of this study lies in its primary quantitative data analysis, which compares the prospects of financial services in China’s advanced DX market. It shows the path the banking industry should take, emphasising the simplicity of mobile applications and the high frequency with which vital components are used. Going beyond theoretical insights, this research is a practical guide for implementing specific actions in a real business environment. It provides valuable insights into the Chinese market and offers guidelines for the broader financial industry currently navigating the intense waves of DX, ultimately aiming for sustainable and effective DX.

Research on Credit Risk Measurement and Management of Commercial Banks in China

This comprehensive study explores the sophisticated landscape of credit risk measurement and management within the commercial banking sector of China, a critical component in maintaining the resilience and stability of its burgeoning financial system. As China's economy continues to integrate with the global market, its banking sector faces escalating credit risk challenges, necessitating advanced and effective management strategies. This paper critically examines the existing methodologies for measuring credit risk, including both traditional approaches and modern innovations that leverage big data and artificial intelligence, assessing their applicability and efficiency in the Chinese context. Moreover, we delve into the multifaceted strategies employed by Chinese commercial banks to manage credit risk, focusing on the integration of regulatory frameworks, technological advancements, and best practices in risk management. Through a methodical review of literature and case studies of prominent Chinese banks, this study identifies key trends, challenges, and opportunities in credit risk management. We evaluate the effectiveness of current practices and propose a set of strategic recommendations aimed at enhancing the robustness of credit risk management systems. These include adopting a more holistic approach to risk assessment, leveraging technology to predict and mitigate risk, and fostering a culture of risk awareness and compliance.

Shadow banking, financial regulation, and bank risk in China

China's 2018 rules on wealth management products (WMPs) have led to determined efforts by regulators to reduce risk in the shadow banking system. Through theoretical model and empirical testing, we explore the impact of the regulation on WMPs and bank performance. Our study finds that after the regulation, banks changed the issuance structure and their profit and risk reduced. The capital did not flow back to on-balance sheet business and the return of WMPs decreased after the regulation.