Stability and economic performances in the banking industry: The case of China

Abstract

We estimate stability performances in the Chinese banking industry over the 2007–2017 period using four risk indicators under nonparametric modelling. We are the first to calculate the risk indicator shadow prices, and we use a new way of studying the relationship between stability and economic performance. In particular, we reexamine stability performances when banks achieve their best economic performances. This questions the existence of stability rents, which form a prime reason for the banking authority to consider economic performance. Finally, we verify whether ownership has an impact on our results and investigate the role of the interest rate liberalization reforms.