Characteristics of Chinese commercial banks and their reaction capabilities in the financial crisis

Abstract

In this study, I selected 280 Chinese commercial banks as research samples and analyzed the main characteristics that positively influenced the banks in overcoming the global financial crisis in 2008. To this end, using the Malmquist index productivity analysis, I segmented the selected sample banks into two groups: one group showed good productivity for both pre-crisis period and post-crisis period in common, and the other group showed poor productivity for both periods. Then I compared the profitability determinants between the two groups through a panel analysis. From the major findings of the analysis, it was identified in the banks which sustained the higher productivity that the higher foreign capital inflow and higher non-interest revenue from diversification had positive impacts on bank profitability, which enables the banks to overcome the financial crisis. In particular, it was found that the foreign capital inflow was very useful for overcoming the financial crisis as well as improving the efficiency and productivity. This implies that, since most of the Chinese commercial banks have been growing under the simple deposit-loan-centric earning structure, the Chinese commercial banks would be able to sustain survival and growth only if they transformed the business structure into a more diversified one in the midst of the opening and universalization trends of the global financialmarkets. © Serials Publications Pvt. Ltd.