We incorporate econometrics approach into panel data methods to examine the impact of the board competence on the performance in Chinese banks. By investigating the biographical background of directors in the 20 largest banks during the period 2008 to 2016, our estimate shows that the board of directors play a prominent role in the performance. Especially, both the education background and the management experience have negative impact on the performance.

This paper investigates whether and how high-speed rail (HSR) construction affects local bank performance. Using the difference-in-difference method, we find that the city commercial banks (CCBs) significantly experience an overall decrease in ROA after HSR is introduced in the headquarters city. Mechanism analysis suggests that the HSR-driven city connectivity imposes the local CCBs on the intensified banking competition related to capital flows, and governance improvements associated with information flows. HSR exerts more pronounced impacts under higher financial liberalization. The findings are robust to the endogeneity concerns. We highlight the indispensable role of transport infrastructure in banking development.

Many studies report that government-owned banks under-perform the private banks but no studies examine the reasons of this stylized fact empirically in emerging countries during 1993~2007. This study fulfills this gap. For simplicity, the under-performance of government banks is referred to as the GOB effect. Two matching theories, Nearest-Neighbor Matching (Nearest) and Mahalanobis Metric Matching (Mahala), are adopted to seek matched banks sharing similar characteristic variables located in the same countries. We propose three hypotheses, strong policy role hypothesis, weak policy role hypothesis and no policy role hypothesis, which classifies government-owned banks as having strong, weak and no policy roles, to explain the above phenomenon. Regarding to why GOB effects are commonly observed in emerging countries, this study find that government-owned banks, after being mandated to merge with a distressed or non-distressed bank, suffer adverse performance, supporting strong and weak policy role hypothesis. On the contrary, this study also finds government-owned banks undertaking no policy role perform equally as private-owned banks on average, supporting no policy role hypothesis. Next, by supporting the above three hypotheses, we suggest that political considerations indeed depress government bank performance and the GOB effect in emerging countries are coming from the policy roles influence.

This paper analyzes empirically what explains the low profitability of Chinese banks for the period 1997-2004. We find that better capitalized banks tend to be more profitable. The same is true for banks with a relatively larger share of deposits and for more X-efficient banks. In addition, a less concentrated banking system increases bank profitability, which basically reflects that the four state-owned commercial banks - China’s largest banks - have been the main drag for system’s profitability. We find the same negative influence for China’s development banks (so called Policy Banks), which are fully state-owned. Instead, more market oriented banks, such as joint-stock commercial banks, tend to be more profitable, which again points to the influence of government intervention in explaining bank performance in China. These findings should not come as a surprise for a banking system which has long been functioning as a mechanism for transferring huge savings to meet public policy goals.

Chinese commercial banks have experienced tremendous growth over the past decade but have received limited academic attention due to data collection difficulty. We’ve successfully compiled a hand-collected panel dataset of Chinese commercial banks governance characteristics from 1998 to 2007. We empirically examine the relation between board governance and the profitability of Chinese commercial banks. We find that board governance has significant impact on Chinese banks’ performance. Specifically, higher board ownership, lower percentage of insiders on board, and lower block ownership are associated with better bank performance. In addition, to improve bank performance, Chinese bank managers should also focus on effectively control of bank’s operating cost, increasing net interest margin, and closely monitoring loan productivity. This is the first study conducted on the efficacy of Chinese banks’ governance system and its relation with banks’ profitability. Empirical evidence from this study has important policy implications in reforming China’s banking system into a more transparent and more efficient market driven system.