The growth, determinants, and profitability of nontraditional activities of Chinese commercial banks
Document Type
Journal article
Source Publication
The European Journal of Finance
Publication Date
2016
Volume
22
Issue
4-6
First Page
259
Last Page
287
Publisher
Routledge
Keywords
banks, nontraditional business, ownership, institutional environment
Abstract
Using a panel data set for China's commercial banks between 1998 and 2007, we investigate the relation between a bank's nontraditional income ratio and its operational and financial characteristics after controlling for ownership type, government policy changes, and cross-regional institutional environment differences. We find that banks with narrow net interest margins have stronger incentives to develop nontraditional activities. Moreover, banks located in regions with less local government intervention have fewer nontraditional banking activities. We find evidence that the ownership type of the bank has some influence on the pursuit of nontraditional activities. Nontraditional income has not led to improved bank profitability and we present some conjectures on why this is so. In contrast to the results reported in prior research, we find that the financial performance of the big-four state-owned banks is not inferior to the performance of other banks.
DOI
10.1080/1351847X.2013.791632
Print ISSN
1351847X
E-ISSN
14664364
Publisher Statement
Copyright © 2016 Taylor & Francis. Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Firth, M., Li, W., & Wang, S. S. (2016). The growth, determinants, and profitability of nontraditional activities of Chinese commercial banks. The European Journal of Finance, 22(4-6), 259-287. doi: 10.1080/1351847X.2013.791632