Diversification strategy and bank market power: does foreign ownership matter?

ABSTRACT

This paper examines whether bank diversification strategy enhances bank market power and how foreign ownership affects this relationship. Using data from Chinese commercial banks for the period 2007–2018, we find that diversification strategy has a positive impact on bank market power and foreign ownership reinforces this effect. Results hold for bank income, non-interest income and asset diversification strategies.

KEYWORDS:

• Diversification strategy
• bank market power
• foreign ownership
• Chinese commercial bank

JEL CLASSIFICATION:

• G21
• G28
• L25

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Sources: http://www.gov.cn/gongbao/content/2002/content_61836.htm; http://www.cbrc.gov.cn/chinese/home/docDOC_ReadView/CB5510B067C649C183490211E5E3B021.html.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China under Grant 71702160; the Fundamental Research Funds for the Central Universities under Grant 20720171077; and Macau University of Science and Technology under Grant FRG-19-049-TISD.