Noninterest activities of Chinese commercial banks remain sluggish. This article examines the price of interest activities and noninterest activities of Chinese commercial banks over 2000–2010 based on OLS and 2SLS regression. We find that the price of interest activities has a significant negative effect on the noninterest activities. It appears that controlled interest rate is the main hindrance of the development of noninterest activities, and the result is consistent with ‘political’ view. We also find that among state-owned commercial banks and nonstate-owned ones, the relationships of interest activities and noninterest activities are differential. The link between the price of interest activities and noninterest activities in state-owned commercial banks is stronger than that in nonstate-owned commercial banks. That is the result of different government intervention degree.

This paper investigates the relationship of ownership structure, listed status and risk by using regression analysis based on the relevant data of Chinas commercial banks. Three main results emerge. First, compared to the state-owned banks, foreign-owned commercial banks exhibit better asset quality, lower credit risk and higher capital adequacy ratio; city commercial banks have lower credit risk and joint-stock commercial banks have lower credit risk and capital adequacy ratio. Second, listed status improves the asset quality and capital adequacy ratio. Finally, we also find that the listed status significantly moderates the relationship between ownership structure and risk. In conclusion, this study provides a theoretical reference for the reform of Chinas commercial banks.

Bondholders are arm’s-length lenders with limited insider information. In this paper, we explore whether corporate social responsibility (CSR) activities could work as an information channel for bondholders to better understand the riskiness of bond-issuing firms. We find a significant negative relation between CSR scores and corporate bond yield spread, especially for firms which invest heavily in diversity and community relations, suggesting that CSR firms are less risky. The result is robust to different model specifications and endogeneity issues. In addition, the negative relation between the CSR score and bond yield spread is significant only if a firm has a strong internal governance mechanism.

Introducing foreign strategic investors (FSIs) is a vital step in the ownership reforms of China’s banking industry. Using China’s data from 1995 to 2014, we employ propensity score matching and difference-in-differences approaches to investigate the effects of FSIs on the business models of Chinese banks, including income structure and funding structure. We find that FSIs significantly influence income structure. The bank’s non-interest income (NII) share significantly rises after introducing FSIs. The higher ownership shares of FSIs are associated with the higher NII share. And the NII share has been increased when FSIs assign directors or senior managers to Chinese banks. We also report that the effects of FSIs on income structure are weaker in state-owned banks than those in other banks, and ownership concentration weakens the links between FSIs and income structure. Finally, this article shows that FSIs have no significant influence on funding structure. These findings will be informative and relevant to both policymakers and practitioners.

Using China’s data from 2000 to 2013, we examine the effects of bank privatization on performance and prudential behavior, and find the following results. First, bank operating efficiency, credit risk, and prudential behavior have improved after introducing foreign strategic investors (FSIs). However, these effects are diminished as time passes. Second, going public increases bank profitability, operating efficiency, and prudential behavior, and reduces credit risk, which are also reversed as time passes. Finally, the effects of introducing FSIs on credit risk and prudential behavior are weaker for state-owned banks than for other banks, while the opposite is true for going public.

This study investigates risk contagion in the financial system using a sample of 140 Chinese banks. We create the risk contagion index, with and without bank WMPs (Wealth Management Products), and bank’s lending matrix. Based on the index, we find Industrial and Commercial Bank of China (ICBC), Industrial Bank, and Bank of Shanghai to have the highest contagion risk among, respectively, state-owned, joint-stock and city commercial banks. We simulate risk contagion with these three banks as the initial bankrupt banks and at a wide range of default loss rates. We find that their hypothetic bankruptcies do not cause other banks to follow suit, but smaller banks are more subject to the contagion effect of systemic risk. Further results show that banks with WMPs cause greater risk contagion than those without.