| Competitive structure, often measured by CR or HHI, reflects the situation of competition of a country. China’s bank industry has been undergoing significant changes since2003, including the joint-stock reform and going public of state-owned banks, the thriving of shareholding banks, and urban and rural credit cooperatives’ merging into urban and rural commercial banks. The years’reform has been reflected not only in the increasing degree of competition of bank industry, but also in the decreasing non-performing loan (NPL) ratio. In the past few years, the NPL ratio of most Chinese banks had decreased to a low level, from29.8%in2000to0.9%in2012, the decrease in NPL ratio of commercial banks suggested their management style had turned to be prudent. Moreover, is the decrease in NPL ratio affected by the competition in bank industry significantly? Do changes in the competition of bank industry or some patterns else cause the decrease? By the study of the mechanism that the competition of bank industry effects bank risk, we may know the crucial mechanism that restrains the risk-taking behavior of commercial banks, and further make suggestions on the development of China’s bank industry for the policy maker. This paper figured out the relationship between the competitive structure of bank industry and bank’s risk-taking behaviors. First, the paper explained the related terms. Second, it presented the mechanism that competitive structure acts on risk-taking. Third, it introduced a model to analyzes the41banks’ panel data from2003to2012, and drawn a conclusion that enhancing the competition of bank industry can restrain the risk behavior of commercial banks and got the inspirations that China’s bank industry needs deeper competition and so on. Last, from the aspect of improving competition, it suggested that the government must encourage the competition among large commercial banks and improve the entry and exit system of the bank industry. |
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