How Does Bank Capital Affect Bank Profitability and Risk? Evidence from China's WTO Accession

21 Pages Posted: 23 Jul 2015

See all articles by Chien-Chiang Lee

Chien-Chiang Lee

Nanchang University

Shao‐Lin Ning

National Sun Yat-sen University - Department of Finance

Chi‐Chuan Lee

Beijing Normal University (BNU)

Date Written: July–August 2015

Abstract

This paper examines how bank capital affects bank profitability and risk in China, and how its impact differed before and after the nation entered the WTO. Our study uses the dynamic generalized method of moments approach with a panel database containing 171 Chinese commercial banks. We find that bank capital has significant influence on bank profitability and risk, but its impact has declined since China joined the WTO in 2001. For different sized groups, the impact of capital on profitability exhibits a distinct trend. The effects of capital on bank risk are different for large and small banks depending on the risk variables used for the Chinese banking industry.

Keywords: bank capital, China, dynamic panel data model, profitability, risk, WTO

JEL Classification: C23, G21, G28

Suggested Citation

Lee, Chien-Chiang and Ning, Shao‐Lin and Lee, Chi‐Chuan, How Does Bank Capital Affect Bank Profitability and Risk? Evidence from China's WTO Accession (July–August 2015). China & World Economy, Vol. 23, Issue 4, pp. 19-39, 2015, Available at SSRN: https://ssrn.com/abstract=2634741 or http://dx.doi.org/10.1111/cwe.12119

Chien-Chiang Lee (Contact Author)

Nanchang University ( email )

999 Xuefu Avenue
Hong Gu Tan New District
Nanchang, Jiangxi 330031
China
330031 (Fax)

Shao‐Lin Ning

National Sun Yat-sen University - Department of Finance ( email )

No.70, Lianhai Rd., Gushan District,
Kaohsiung City
Taiwan

Chi‐Chuan Lee

Beijing Normal University (BNU) ( email )

19 Xinjiekou Outer St
Haidian District
Beijing, Guangdong 100875
China

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
448
PlumX Metrics