Regulatory reforms and convergence of the banking sector: evidence from China
Abstract
Purpose
The purpose of this paper is to examine the effect of regulatory reform on the asset allocation and capitalization of Chinese banks from 2002 to 2007, a period following China's entry into the World Trade Organization (WTO).
Design/methodology/approach
The evidence rejects a hypothesis that the four categories of banks operating in China – the Big Four, Majority State, Majority Private, and Majority Foreign banks have converged toward common targets. Supplemental analysis indicates that domestic banks, but not foreign banks, adjust equally to their targets.
Findings
The paper concludes that, although Chinese banking remained segmented during this unique transitional period, a more uniform pattern has emerged for those Chinese banks that are domestically owned.
Originality/value
The authors employ a methodology that is explicitly designed to determine if banks have converged toward common approaches to asset allocation and capitalization, which has not been studies previously.
Keywords
Acknowledgements
JEL Classifications — G21, G28
The authors thank Ana Lozano-Vivas and seminar participants at the 11th Annual Bank of Finland/CEPR conference for their helpful comments.
Citation
C. Brau, J., Dahl, D., Zhang, H. and Zhou, M. (2014), "Regulatory reforms and convergence of the banking sector: evidence from China", Managerial Finance, Vol. 40 No. 10, pp. 956-968. https://doi.org/10.1108/MF-07-2013-0178
Publisher
:Emerald Group Publishing Limited
Copyright © 2014, Emerald Group Publishing Limited