The effects of reform on China’s bank structure and performance
Xiaoqing (Maggie) Fu1; Shelagh Heffernan2
Source PublicationJournal of Banking and Finance
ABS Journal Level3

This paper investigates the relationship between market structure and performance in China’s banking system from 1985 to 2002, aperiod when this sector was subject to gradual but notable reform. Using panel data estimation techniques, both the market-power andefficient-structure hypotheses are tested. In addition, the model is extended to consider issues such as the impact of bank size/ownershipand whether the big four banks enjoy a ‘‘quiet life”. On average, X-efficiency declined significantly and most banks were operating belowscale efficient levels. Estimation of the structure–performance models lends some support to the relative market-power hypothesis in theearly period. The reforms had little impact on the structure of China’s banking sector, though the ‘‘joint stock”banks became relativelymore X-efficient. There was no evidence to support the quiet-life hypothesis, probably because strict interest rate controls prevented thestate banks from earning monopoly profits. Thus the ongoing liberalisation of interest rates should be accompanied by reduced concen-tration. Overall, to improve competitive structure, new policies should be directed at encouraging market entry and increasing the marketshare of the most efficient banks.

KeywordMarket Structure And Performance Reform Of China’s Banking Sector X-efficiency Scale Efficiency
Indexed BySSCI
WOS Research AreaBusiness & Economics
WOS SubjectBusiness, Finance ; Economics
WOS IDWOS:000261906800006
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Cited Times [WOS]:153   [WOS Record]     [Related Records in WOS]
Document TypeJournal article
Corresponding AuthorXiaoqing (Maggie) Fu; Shelagh Heffernan
Affiliation1.Faculty of Business Administration, University of Macau, Taipa, Macau, China
2.Faculty of Finance, Cass Business School, City University, 106 Bunhill Row, London EC1Y 8TZ, UK
First Author AffilicationFaculty of Business Administration
Corresponding Author AffilicationFaculty of Business Administration
Recommended Citation
GB/T 7714
Xiaoqing ,Shelagh Heffernan. The effects of reform on China’s bank structure and performance[J]. Journal of Banking and Finance,2009,33(1):39-52.
APA Xiaoqing ,&Shelagh Heffernan.(2009).The effects of reform on China’s bank structure and performance.Journal of Banking and Finance,33(1),39-52.
MLA Xiaoqing ,et al."The effects of reform on China’s bank structure and performance".Journal of Banking and Finance 33.1(2009):39-52.
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