The Impact of Bank-Specific and Macroeconomic Factors on China’s Bank Performance ok

Abstract

Abstract In the last decade the Chinese government owned banks have undergone a privatization program resulting in considerable changes in ownership of Chinese banks. This paper examines the impact of bank-specific, macroeconomic, financial, and globalization variables on the performance of Chinese banking from 2004 to 2010. The results suggest that banks with lower credit risk, which are well capitalized, tend to be more profitable, while banks with higher expense preferences exert a negative impact on bank performance. The macroeconomic variables suggest that China’s financial services tend to grow along with economic growth. Our results also suggest that greater economic integration through increased trade and capital flows coincides with an increase in bank profitability. Likewise, social globalization and political globalization seem to exert positive effects on the profitability of Chinese banks.