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Discrete Dynamics in Nature and Society
Volume 2016, Article ID 3695379, 10 pages
Research Article

Competition, Innovation, Risk-Taking, and Profitability in the Chinese Banking Sector: An Empirical Analysis Based on Structural Equation Modeling

Ti Hu1 and Chi Xie1,2

1College of Business Administration, Hunan University, Hunan, China
2Center of Finance and Investment Management, Hunan University, Hunan, China

Received 23 August 2016; Accepted 3 October 2016

Academic Editor: Chris Goodrich

Copyright © 2016 Ti Hu and Chi Xie. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


We introduce a new perspective to systematically investigate the cause-and-effect relationships among competition, innovation, risk-taking, and profitability in the Chinese banking industry. Our hypotheses are tested by the structural equation modeling (SEM), and the empirical results show that (i) risk-taking is positively related to profitability; (ii) innovation positively affects both risk-taking and profitability, and the effect of innovation on profitability works both directly and indirectly; (iii) competition negatively affects risk-taking but positively affects both innovation and profitability, and the effects of competition on risk-taking and profitability work both directly and indirectly; (iv) there is a cascading relationship among market competition and bank innovation, risk-taking, and profitability.