Impact of ownership structure and ownership concentration on credit risk of Chinese commercial banks

Yang Liu, Sanjukta Brahma, Agyenim Boateng

Research output: Contribution to journalArticle

Abstract

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.
Original languageEnglish
Number of pages20
JournalInternational Journal of Managerial Finance
DOIs
Publication statusPublished - 30 Sep 2019

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Credit risk
Ownership concentration
Ownership structure
Commercial banks
Ownership
Private ownership
Bank ownership
Government
Loan loss provisions
Non-performing loans
Herfindahl index
Government ownership
Financial crisis
Bank lending
Corporate governance reform
Panel data
Generalized method of moments

Keywords

  • credit risk
  • ownership structure
  • loan loss provision
  • Herfindahl-Hirchmann index
  • G32

Cite this

Liu, Yang ; Brahma, Sanjukta ; Boateng, Agyenim. / Impact of ownership structure and ownership concentration on credit risk of Chinese commercial banks. In: International Journal of Managerial Finance. 2019.
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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 journalArticle

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