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Can foreign banks compete in C hina?
Author(s) -
Avkiran Necmi K.,
Zhu Yushu,
Tripe David W. L.,
Walsh Kathleen
Publication year - 2017
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12188
Subject(s) - profitability index , frontier , robustness (evolution) , stochastic frontier analysis , business , monetary economics , economics , financial system , microeconomics , finance , production (economics) , biology , genetics , gene , history , archaeology
Foreign banks in C hina have faced strict regulatory requirements that were not imposed on domestic banks and as such they have performed poorly in profitability rankings. Recent changes in the C hinese regulatory requirements prompt us to consider whether foreign banks are now on an equal footing with the C hinese domestic banks. Using C obb– D ouglas stochastic frontier analysis with total income as the dependent variable, we find no significant performance difference between foreign and domestic banks. However, robustness testing using the individual components of total income as dependent variables reveals that foreign banks need to improve efficiency of their income generation.