Does Foreign Bank Entry Make Chinese Banks Stronger?

SMC Author

Xiaotian Tina Zhang

SMC Affiliated Work

1

Status

Faculty

School

School of Economics and Business Administration

Department

Finance

Document Type

Article

Publication Date

7-3-2015

Publication / Conference / Sponsorship

Global Economic Review: Perspectives on East Asian Economies and Industries

Description/Abstract

China has encouraged its domestic banks to introduce foreign investment since the early 2000s. In the meantime, China has gradually fulfilled its World Trade Organisation (WTO) accession commitment to give foreign banks the same treatment as their Chinese counterparts in the last decade. This research has examined the effects of the two modes of foreign bank entry, namely, minority ownership participation, and setting up branches and subsidiaries, on the performance of Chinese banks. Our results suggest that there is no systematically significant impact of the minority ownership participation on the performance indicators of Chinese banks. However, it appears that the physical presence of foreign banks has been a significant driver for domestic banks to improve profitability and efficiency. Opening the country to foreign banks appears to have made Chinese banks stronger and more competitive.

Keywords

Chinese banks, foreign bank entry, minority ownership, bank performance

Scholarly

yes

Peer Reviewed

1

DOI

10.1080/1226508X.2015.1055779

Volume

44

Issue

3

First Page

269

Last Page

285

Disciplines

Business | Economics

Original Citation

Yin, Y. K., Zhang, Y., Zhang, X. T. & Hu, F. (2015). Does foreign bank entry make Chinese banks stronger? Global Economic Review: Perspectives on East Asian Economies and Industries, 44(3), 269-285. http://dx.doi.org/10.1080/1226508X.2015.1055779

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