Abstract
Using panel data on a sample of 88 Chinese commercial banks with 826 observations over a period of 2003-2018, this study has applied system generalised method of moments regression to examine the impact of bank ownership structure and ownership concentration on credit risk. This study has used two measures of credit risk, which are non-performing loan ratio and loan loss provision ratio.
The results show that ownership type (both government and private ownership) exert positive and significant impact on credit risk. Measuring ownership concentration using Herfindahl Hirchmann Index, the results indicates that concentration of ownership in the hands of government has negative and significant effect on credit risk while private ownership concentration positively impacts on credit risk. Overall our findings suggest that concentration of ownership in government hands reduces risk, however private ownership concentration exacerbates credit risks. Our results are invariant to both measure of credit risk and both before and after the financial crisis.
The findings provide useful insight to guide policy decisions in Chinese banks’ lending policies and bank ownership.
Using two ex-post measures of credit risk, non-performing loan ratio and loan loss provision ratio and one ownership concentration measure, Herfindahl-Hirchmann Index (HHI), this study deepens our understanding on the effectiveness of Chinese banks’ corporate governance reforms on managing credit risks.
| Original language | English |
|---|---|
| Number of pages | 20 |
| Journal | International Journal of Managerial Finance |
| DOIs | |
| Publication status | Published - 30 Sep 2019 |
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Keywords
- credit risk
- ownership structure
- loan loss provision
- Herfindahl-Hirchmann index
- G32
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Impact of ownership structure and ownership concentration on credit risk of Chinese commercial banks. / Liu, Yang; Brahma, Sanjukta; Boateng, Agyenim.
In: International Journal of Managerial Finance, 30.09.2019.Research output: Contribution to journal › Article
TY - JOUR
T1 - Impact of ownership structure and ownership concentration on credit risk of Chinese commercial banks
AU - Liu, Yang
AU - Brahma, Sanjukta
AU - Boateng, Agyenim
N1 - Acceptance in SAN Emerald provided the file attached to Pure in the email to author confirming AAM version. ET 20/8/19 AAM: no embargo upon publication. ^Removed temp holding embargo for Pure migration ET 5-9-19 Added pre-pub embargo end date. ET 8/11/19
PY - 2019/9/30
Y1 - 2019/9/30
N2 - The purpose of this study is to examine the effects of bank ownership structure and ownership concentration on credit risk.Using panel data on a sample of 88 Chinese commercial banks with 826 observations over a period of 2003-2018, this study has applied system generalised method of moments regression to examine the impact of bank ownership structure and ownership concentration on credit risk. This study has used two measures of credit risk, which are non-performing loan ratio and loan loss provision ratio.The results show that ownership type (both government and private ownership) exert positive and significant impact on credit risk. Measuring ownership concentration using Herfindahl Hirchmann Index, the results indicates that concentration of ownership in the hands of government has negative and significant effect on credit risk while private ownership concentration positively impacts on credit risk. Overall our findings suggest that concentration of ownership in government hands reduces risk, however private ownership concentration exacerbates credit risks. Our results are invariant to both measure of credit risk and both before and after the financial crisis.The findings provide useful insight to guide policy decisions in Chinese banks’ lending policies and bank ownership.Using two ex-post measures of credit risk, non-performing loan ratio and loan loss provision ratio and one ownership concentration measure, Herfindahl-Hirchmann Index (HHI), this study deepens our understanding on the effectiveness of Chinese banks’ corporate governance reforms on managing credit risks.
AB - The purpose of this study is to examine the effects of bank ownership structure and ownership concentration on credit risk.Using panel data on a sample of 88 Chinese commercial banks with 826 observations over a period of 2003-2018, this study has applied system generalised method of moments regression to examine the impact of bank ownership structure and ownership concentration on credit risk. This study has used two measures of credit risk, which are non-performing loan ratio and loan loss provision ratio.The results show that ownership type (both government and private ownership) exert positive and significant impact on credit risk. Measuring ownership concentration using Herfindahl Hirchmann Index, the results indicates that concentration of ownership in the hands of government has negative and significant effect on credit risk while private ownership concentration positively impacts on credit risk. Overall our findings suggest that concentration of ownership in government hands reduces risk, however private ownership concentration exacerbates credit risks. Our results are invariant to both measure of credit risk and both before and after the financial crisis.The findings provide useful insight to guide policy decisions in Chinese banks’ lending policies and bank ownership.Using two ex-post measures of credit risk, non-performing loan ratio and loan loss provision ratio and one ownership concentration measure, Herfindahl-Hirchmann Index (HHI), this study deepens our understanding on the effectiveness of Chinese banks’ corporate governance reforms on managing credit risks.
KW - credit risk
KW - ownership structure
KW - loan loss provision
KW - Herfindahl-Hirchmann index
KW - G32
U2 - 10.1108/IJMF-03-2019-0094
DO - 10.1108/IJMF-03-2019-0094
M3 - Article
ER -