-
Risk, Profitability, and Competition: Evidence from the Chinese Banking Industry
- The Journal of Developing Areas
- Tennessee State University College of Business
- Volume 48, Number 3, Summer 2014
- pp. 303-319
- 10.1353/jda.2014.0054
- Article
- Additional Information
This paper investigates the inter-temporal relationship between banking profitability, competition and risk of a sample of Chinese commercial banks by employing several profitability and risk indicators and using Seemingly Unrelated Regression (SUR) under a panel data framework over 2003–2009. The results support the Structure-Conduct-Performance (SCP) theory which states that there is a negative impact of competition on bank profitability. We also find that banks with higher profitability normally operate in a less competitive environment. The results have potentially important implications for the government and banking regulatory authorities to make relevant policies.