Chinese Commercial Banks Research Articles

The Influence of Foreign Shareholding Ratio on the Stability of Chinese Commercial Banks

The Influence of Foreign Shareholding Ratio on the Stability of Chinese Commercial Banks

Motivation of Chinese commercial banks to issue green bonds: Financing costs or regulatory arbitrage?

This paper analyzes the reasons for the rapid increase in the scale of green bonds issued by Chinese commercial banks in recent years from the perspective of financing costs and regulatory arbitrage. Our empirical results show that the financing cost mechanism cannot explain this increase since the financing costs of green bonds are not lower than those of non-green financial bonds. Furthermore, commercial banks with low asset liquidity engage in regulatory arbitrage to take advantage of the convenience of green bond financing permission to supplement their liquidity. Our results imply that the regulatory arbitrage mechanism is a very important motivation for commercial banks to issue green bonds. To reduce this motivation and ensure the healthy and sustainable development of the green bond market, green ratings of projects should be linked with financing costs as a way to form a positive feedback incentivizing mechanism for green project financers.

Preceding Dividend as a signal of Future Dividends: Evidence from Chinese Commercial Banks

Dividend policy is a prime concern of all stakeholders for it represents major cash outflow. There are two major underlying considerations for present study; first, academicians have spent more than five decades now and used various theoretical and empirical models to explore and study nature of determinants of dividend policy; but the issue is yet unresolved and open for further discussion. Second, majority of extant studies used data from developed economies to understand dividend myth. In addition, from available studies, the study on dividend policy of non-financial sector takes large area in pie. The present study is based on model after considering all factors to address dividend policy of commercial banks in emerging markets. Secondary data is used for statistical analysis the empirical results indicate significant relationship of provisioning against non-performing loans (LNPNPL), total assets (LNTA) and return on assets (ROA) on dividend payout ratio. LNPNPL significantly and negatively causes dividend policy, this indicates that banks with higher level of risk pay less dividends. Similarly, ROA significantly and positively explains variations in dividend payout ratio. The positive relationship tells that banks with higher returns (profitable banks) pay higher dividends. The negative and significant relation (causal) between LNTA and dividend payout indicates that Chines banks pay less dividends as they grow bigger in size. Other variables of model indicate insignificant relationships. Findings support existing literature but the size of bank has significant but inverse relationship with dividend policy. The findings are instrumental for investors aspiring for dividend income.

The impact of internal and external factors of credit risk on businesses: An empirical study of Chinese commercial banks

AbstractCredit risk has great impact on the banks' profitability as large chunk of banks' revenue and interest income comes from loans. Factors that affects credit risk can be classified into microeconomic and macroeconomic factors. These factors have an impact on credit risk levels. Using secondary data from 2005 to 2018 for listed commercial banks on the two stock exchanges in China mainland, the study explored the effect of both internal and external factors that influences credit risk in the banking industry. A positive relationship was found between bank solvency and credit risk. Similarly, the study revealed a positive correlation between credit risk and interest rate. On the contrary, operation efficiency and gross domestic product growth rate revealed an inverse relationship with credit risk. The findings will add up to existing literature and guide policy‐makers in implementing measures to control the influencing factors of credit risk in the banking industry.

Do front-line employees in the Chinese commercial banks have the rights to experience psychological well-being?

PurposeBy drawing on leader–member exchange theory, this study aims to understand the relationship between job autonomy, transformational leadership and psychological well-being mediated by job satisfaction among front-line employees in Chinese commercial banks.Design/methodology/approachA cross-sectional study which consists of 96 respondents from 5 Chinese commercial banks is conducted.FindingsThrough data analysis, the results reveal that transformational leadership and job autonomy are significantly positively related to job satisfaction and directly related to the psychological well-being of front-line employees in Chinese commercial banks. Another interesting finding is that there is a mean difference between male and female front-line employees in Chinese commercial banks on the preference of job autonomy and transformational leadership.Originality/valueThe current study offers further evidence for which strategies Chinese commercial banks should adopt to enhance and protect the rights of front-line employees’ psychological well-being. As front-line employees in commercial banks play a vital role in contributing to bank profits and operational efficiency. They are not only the employees for making profits but also have the right to experience the psychological well-being as a human. Employees with a high level of job satisfaction and psychological well-being benefit both their own health and organizational performance in the long run.

A new way to estimate market power in banking

Market power in banking is very important to increase a bank’s competitive power. The investigation of this is of particular relevance to the Chinese banking industry in the light of the stability issue experienced by the Chinese commercial banks in 2019. Instead of using translog cost function or semi-parametric method as a component to estimate Lerner index, this study estimates Lerner index based on data envelopment analysis. The results show that joint-stock banks have the lowest market power, while although city commercial banks have a higher level of market power than joint-stock commercial banks, it is still lower than the other three ownership types. Overall, the Chinese banking industry experienced a decline in the level of market power from 2010 to 2015, after which there was a slight increase in the level, the market power ended up with a value of 0.937 by the of 2018. We notice that the Chinese banking industry in general has a higher level of market power with the value of Lerner index achieved more than 0.93 for every year of the examined period.

INTERNET FINANCE, NET INTEREST MARGIN AND NONINTEREST ACTIVITIES IN CHINA’S BANKING SECTOR

Using data from 133 Chinese commercial banks from 2003 to 2015, we examine the links among Internet finance, net interest margin and noninterest activities. Four main findings emerge. First, the net interest margin exerts significantly negative impacts on the noninterest activities through incentive distortion, cross-subsidization and resource restriction effects. The incentive distortion effect plays a stronger role, while the cross-subsidization and resource restriction effects play weaker roles. Second, Internet finance significantly promotes the development of noninterest activities, meaning that the technology spillover effect of Internet finance is stronger than the customer loss effect in China. Third, Internet finance strengthens the negative effects of the net interest margin on fee and commission activities but weakens the negative effects of the net interest margin on other noninterest activities. Finally, we find that the effects of the net interest margin on noninterest activities are stronger in state-owned banks than in non-state-owned banks, while the effects of Internet finance on noninterest activities are weaker in state-owned banks.

How fintech impacts pre‐ and post‐loan risk in Chinese commercial banks

AbstractDue to information asymmetry in the lending market, credit activities inevitably cause pre‐ and post‐loan risk in banks. To explore whether these risks can be alleviated by fintech and study its specific mechanism from the perspective of managers, we investigate on a sample from the establishment of fintech subsidiaries in Chinese commercial banks during 2014–2018. The results show that fintech can alleviate pre‐loan risk associated with credit activities, and this negative effect is more pronounced in banks with higher level of managerial ownership. As the control of post‐loan risk is more dependent on the regulators, fintech in banks has no significant effect on reducing post‐loan risk associated with credit activities. This paper adds empirical evidence on the role of fintech in banks.

A Study on Factors Affecting the Non-performing Loans in Chinese Commercial Banks

본 연구의 목적은 중국 상업은행의 부실대출에 영향을 미치는 요인을 도출하고자 한다. 중국은 이미 세계경제 2위로 도달하였으며 한국의 최대 무역 수출국이 되었다. 따라서 중국 은행업의 부실대출에 양향을 미치는 요인들을 연구함으로서 중국 경제와 밀접한 관계가 있는 한국기업들에게도 중국 상업은행의 리스크 관리 행태를 이해하는데 도움이 될 것이다. 본 연구에서는 중국 상업은행의 부실대출에 영향을 미치는 요인을 거시경제 변수와 미시경제 변수로 분석하였다. 거시적 영향 요인에는 주로 중국국내총생산증가율(GDPR), 화폐공급증가율(M2R), 미시적 영향 요인에는 주로 예대비율(LDR), 자기자본비율(CAR), 상업은행재테크발행규모(WMP), 기업경기지수(BCI)를 고려하였다. 연구 결과는 ①총생산증가율이 부실대출과 플러스 관계로 나타났고, ②화폐공급증가율이 은행의 부실대출율이 마이너스 관계이며 장기적으로 균형으로 나타났다. ③예대비율은 대출액과 예금액의 비례한다. ④상업은행의 자기지본비율과 부실대출율이 마이너스 관계이다. ⑤상업은행의 재테크발행규모가 확대되면서 은행의 부실대출도 늘어나게 되고 플러스 관계가 볼 수 있다. ⑥기업경기지수는 기업의 경영상황과 수익능력을 반영하고 부실대출율이 마이너스 관계를 나타낸다. 분석 결과에 따라 중국은행업은 부실대출의 관리수준을 제고해야 하며 은행마다 자체의 특징과 더불어 경제정책의 환경 속에서 효과적인 리스크 관리 방안을 세워야 할 것이다.As time goes on, China has become a populous country and the world’s second largest economy. The stable development of China s economy has become a concern of China, where the banking industry plays a remarkable role in China. Under the new economic situation, the phenomenon of Non-performing Loans in Chinese Commercial Banks has become increasingly serious with the development of China’s economy. Therefore, in this context, it is of great significance to analyze the factors which affect the Non-performing Loans of Chinese Commercial Banks. Research model selected the data of 7 factors in the quarter from 2011 to 2019, where USES VAR model was used for empirical analysis, and chose all Chinese Commercial Banks Non-performing Loans, China s gross domestic product (GDP) growth rate, Broad money(M2) growth rate of China, the LDR of Chinese commercial bank, the capital adequacy ratio of Chinese Commercial Bank, the wealth management products of Chinese Commercial Bank, China s business climate index as variables, using VAR model to analyze the impact of these seven variables on the bank Non-performing Loans. According to the theoretical analysis and empirical analysis, six factors affect the Non-performing Loan Ratio of China s Commercial Banks. Based on the obtained results it indicates that China s economy is growing, whereas bubble economy exists. Therefore, Banks need to strengthen their internal manngement.

중국상업은행의 경영 안정성 분석

중국상업은행의 경영 안정성 분석

Shadow Prices of Non-performing Loans for Chinese Banks in the Post-Crisis Era

This paper examines how non-performing loans (NPLs) affect Chinese commercial banks before, during, and after the 2008 global financial crisis as well as the subsequent 2008—2010 stimulus. By accounting for NPLs as undesirable outputs, banks' technical efficiency is estimated using directional output distance function. The envelop theorem is applied to calculate the shadow price of NPLs. The shadow price of NPLs is the opportunity cost of reducing NPLs by one Chinese yuan. Empirical results show that the four major state-owned banks are the least technically efficient while foreign banks are the most efficient over the sample period 2007—2014. I also find that the crisis has a negative effect on banks' technical efficiency while the stimulus initially has a positive effect on four major state-owned commercial banks and joint-stock commercial banks, but later shows a negative effect with a higher default ratio and lower efficiency. Finally, the data show that the stimulus has greatly increased the shadow price of NPLs for four major state-owned commercial banks. Starting in 2011, the shadow prices of NPLs for four major state-owned commercial banks are much higher than all other bank types.

Study on the Prevention and Controlling of Dissimilation of Social Functions of Commercial Banks Based on the Fulfillment of Social Responsibility of Chinese Commercial Banks

The dissimilation of the social functions of commercial banks is a phenomenon that the function of commercial banks deviates from the economic development and the people's livelihood. Such phenomenon, which can be seen all over the world, impedes the socio-economic development and affects the well-being of the people to some degree. After investigating and analyzing the dissimilation of the social functions of Chinese commercial banks, it was found that their social functions play a significant role, and the booming development of these banks has made great contribution to the economic growth and improved people's livelihood in China. China should also have special experience in preventing and handling this dissimilation.

Analysis of the Impact of Interest Rate Liberalization on Financial Services Management in Chinese Commercial Banks

With the advancement of China's interest rate marketization reform, commercial banks' net interest margin has narrowed. This paper selects 16 representative listed banks as the research object and conducts an empirical analysis from the two dimensions: profit level and profit structure. The study finds that the marketization of interest rates promoted the narrowing of net interest margins caused by the narrowing of net interest margins, and the profitability of commercial banks was suppressed. The narrowing of net interest spreads forced commercial banks to actively expand their intermediate business activities and adjust business structure correspondingly. The narrowing of net interest spreads has different impacts on the profitability of commercial banks of different sizes.

Does bank FinTech reduce credit risk? Evidence from China

Using data from Chinese commercial banks between 2008 and 2017, this paper explores the effects of bank FinTech on credit risk. We first construct and measure a bank FinTech index using web crawler technology and word frequency analysis. The results show that the development of bank FinTech is faster in state-owned banks than in other banks. Moreover, among the five subareas of bank FinTech, the development of internet technology is ahead of artificial intelligence technology, blockchain technology, cloud computing technology, and big data technology. Then, the impacts of bank FinTech on credit risk are examined. We find that bank FinTech significantly reduces credit risk in Chinese commercial banks, and further analyses show that the negative effects of bank FinTech on credit risk are relatively weak among large banks, state-owned banks, and listed banks.

Deconstructing three‐stage overall efficiency into input, output and stability efficiency components with consideration of market power and loan loss provision: An application to Chinese banks

AbstractThe current study proposes a new three‐stage network data envelopment analysis (DEA) model to estimate three different types of efficiencies. More specifically, the input efficiency is estimated in the first stage, followed by the evaluation of stability efficiency in the second stage, and finally, the output efficiency is derived from the final stage. In particular, we consider market power in deposits and market power in loans in the banking production process. Rather than using non‐performing loans as an undesirable output, this paper innovatively uses loan loss provisions in bank production. We argue that the loan loss provisions are helpful to improve bank stability because they provide a cushion to absorb unexpected losses, therefore we treat it as a good intermediate output in the second stage and a good intermediate input in the third stage. The results exhibit that the scores of stability inefficiency are the highest, followed by output inefficiency, while Chinese commercial banks have the lowest level of input inefficiency. Not only did we observe that the Chinese banking industry has the highest level of stability inefficiency, but we also noticed that the stability inefficiency had the strongest volatility during 2007–2017. We also explore the impact of non‐performing loan ratios from three different geographical areas on bank efficiency in China in a second‐phase regression analysis, the results of which show that the input inefficiency results from higher levels of financial risk from the central area in China, while the western area in China has the opposite sign.

The Influence of Chinese Commercial Banks’ Leverage Ratio on Systemic Financial Risk

Based on panel data model and the classification of Chinese commercial banks, this paper established a two-way fixed effect model, and empirically analyzes the relationship between leverage ratio and financial risk of the five common types of banks in China. The results show that leverage ratio is the main index that affects the steady development of Chinese commercial banks, and the high leverage ratio will lead to high financial risk. This paper holds that, in the future, we should pay more attention to the development of leverage ratio. On this basis, the main regulatory indicators should be adjusted according to the characteristics of banks. It is of great significance to control financial risks and maintain the stable operation of financial market.

The impact of off-balance-sheet regulations on bank risk-taking: Evidence from China

The release of new asset management rules has played a positive role in regulating the asset management business of financial institutions, preventing and controlling financial risk. It has also had an important impact on the management of banks’ off-balance-sheet (OBS) innovation. This paper uses unbalanced panel data on 75 commercial banks in China from 2007 to 2017 and combines a theoretical and an empirical model to study the development of bank OBS innovation and bank risk taking from the perspective of new asset management regulations. The analysis finds (1) the rapid development of OBS innovation will increase bank risk taking and (2) the solution to the problem of rigid payment is conducive to reducing the risk taken by Chinese commercial banks when providing OBS innovation.

Does the market accept the perpetual bonds issued by commercial banks? Evidence from China

ABSTRACT Despite the prevalence of the research on the issuance of perpetual bonds by non-financial enterprises, Chinese commercial banks only started using perpetual bonds for financing in 2019. Taking the first bank perpetual bond issued by the Bank of China (BOC) as an example, this study analyzes the economic consequences of commercial banks issuing perpetual bond financing using the event study method. Specifically, it analyzes the change in the excess return rate before and after the event and impact of the information disclosure behaviour of BOC’s perpetual bond financing on stock prices to determine the capital market reaction before and after the issue. The issuance of perpetual bonds had a short-term negative effect on stock prices but, overall, investors hold a positive attitude towards the perpetual bonds issued by the BOC, which may be related to the choice of market time for the issuance.

The double-edged sword effect of diversified operation on pre- and post-loan risk in the government-led Chinese commercial banks

Under the background of China’s deregulation of financial institutions since 2004, Chinese commercial banks have undergone remarkable change from traditional lending activities to universal fee-based activities. This paper explores the effect of diversified operation on bank credit activities. We find that diversification can reduce pre-loan risk but increase post-loan risk. Besides, enhanced disclosure requirement of other comprehensive income can mitigate pre- and post-loan risk under diversified operation. Additionally, in the state-owned commercial banks where government function is primary, diversification reduces both pre- and post-loan risk. This paper aims to reveal the double-edged sword effect of diversification in the Chinese commercial banks which are more government-led.

A Study on Foreign Investment Strategy of Four Major Chinese Commercial Banks

본 연구의 목적은 중국 4대 상업은행의 해외투자여부, 해외투자의 지역선택, 해외투자의 성과에 영향을 주는 요인들에 관한 실증분석을 하고자 한다. 중국 상업은행의 해외직접투자 여부에 관한 가설에 대해서는 로지스틱모형을 이용하여 분석하였다. 추정한 결과 중국 상업은행의 해외투자 여부는 은행의 총자산수익률, 자산규모, 비이자 이익, 순이자 마진이 통계적으로 유의한 것으로 나타났다. 중국 상업은행 해외투자의 지역선택요인으로는 중국이 상대국에 대한 해외직접투자(FDI) 금액과, 파이낸스 센터 존재여부, 상대국의 1인당 GDP, 상대국과 지리적 거리가 중요한 변수로 나타났다. 해외직접투자 성과에 미치는 영향요인에서는 해외자산 대비 총자산의 비율과 자산시장 변동 상황, 영업이익경비율 등이 중요한 변수로 나나났다. 이러한 결과는 ‘일대일로’가 본격화되기 전인 2013년 이전에 실시된 유사한 선행 연구결과와 비교하여 중국의 주요 상업은행이 외국으로 진출할 때 어떠한 요인들이 중요하게 작용하는가를 설명하고 있어 향후 다른 중소 중국 은행의 해외 진출 시 의미 있는 정보를 제공할 수 있을 것으로 사료된다.The purpose of this study is to conduct an empirical analysis on the factors affecting the choice of foreign investment, the selection of regions of foreign investment, and the performance of foreign investment by the four major commercial banks in China. The hypothesis as to whether or not the Chinese commercial bank is invested in foreign direct investment was analyzed using the logistic model. As a result of the estimation, it was found that the total investment yield, asset size, non-interest income, and net interest margin of the Chinese commercial bank were statistically significant. As a regional selection factor of the Chinese commercial bank s foreign investment, China s foreign direct investment (FDI) amount, the existence of a finance center, GDP per capita of the other country, and geographical distance from the other country were important variables. The factors affecting performance after foreign direct investment were the important factors such as the ratio of total assets to overseas assets, the situation of asset market fluctuations, and operating profit ratio. These results explain what factors are important when major commercial banks enter foreign countries compared to similar prior studies conducted prior to 2013, before One Belt One Road began in earnest. It is thought that it can provide meaningful information regarding the Chinese banks entering overseas.