Bank Age and Financial Performance: Is the Relationship Linear or Nonlinear? Evidence From Listed and Unlisted Commercial Banks in China

Abstract

This study empirically investigates the impact of bank age on bank financial performance using a sample of 50 commercial banks from Chinese banking industry over the period 2006-2019. In this study, we employ an unbalanced panel data set and PCSE panel estimation procedure. After controlling for the bank-specific, the industry-specific, and the macroeconomic indicators, our estimation results suggest that there exists a positive and linear relationship between bank age and profitability indicators in ROA and ROE models for listed banks. However, the estimated coefficients for bank age and its square are found to be statistically significant in all models (i.e. ROA, ROE and NIM) for unlisted banks. These results suggest that age-profitability linkage follows the U-shaped pattern for unlisted banks.