BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
Is bank competition detrimental to efficiency? Evidence from China
(), Pierre Pessarossi
() and Laurent Weill
Abstract: This paper addresses the relationship between bank
competition and efficiency by computing Lerner indices and cost efficiency
scores for a sample of Chinese banks over the period 2002-2011.
Granger-causality tests are performed in a dynamic GMM panel estimator
framework to evaluate the sign and direction of causality between them. We
observe no increase in bank competition over the period, even as cost
efficiency improves. In a departure from the empirical literature showing
that competition negatively granger-causes cost efficiency for Western
banks, we find no significant relation between competition and efficiency.
This suggests that measures to increase bank competition in the Chinese
context are not detrimental to efficiency.
Keywords: bank; competition; efficiency; China; (follow links to similar papers)
JEL-Codes: D40; G21; (follow links to similar papers)
36 pages, December 17, 2012
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