Does the target market affect bank performance? Evidence from the geographic diversification of city commercial banks in China

Frontiers of Business Research in China

Table 5 2SLS regression using 1–Predicted HHI as an instrument

Dependent variable	(1) ROA	(2) ROE	(3) NPL ratio	(4) Cost	(5) Market share
Panel A Second-stage
1–HHI	−0.006^a (0.003)	− 0.082^a (0.048)	1.327^a (0.775)	0.024^c (0.004)	0.355^b (0.137)
Loan ratio	0.015^c (0.002)	0.036^a (0.019)	0.444 (0.319)	0.032^c (0.002)	0.136^b (0.078)
Asset ratio	−0.006^a (0.007)	− 0.002 (0.001)	− 0.086^c (0.027)	0.000 (0.000)	−4.533^c (0.897)
Capital	0.006^b (0.003)	−0.301^c (0.065)	− 0.782 (0.755)	0.010^c (0.004)	− 0.313^b (0.192)
Asset quality	0.001^b (0.002)	−0.004 (0.008)	0.036 (0.215)	0.000 (0.001)	1.389^c (0.511)
GDP	−1.984 (2.193)	13.998 (39.002)	− 2793.267^c (643.740)	0.829 (3.154)	−62.621^c (17.233)
Age	−0.001 (0.001)	0.011^c (0.002)	− 0.011 (0.062)	0.000 (0.000)	− 0.023 (0.010)
Size	54.743 (33.593)	733.750^a (434.495)	21,350.632^b (8308.440)	50.455 (40.844)	1.258^c (0.411)
Constant	0.001 (0.003)	−0.003 (0.044)	1.708^a (0.999)	− 0.010^b (0.005)	0.349^b (0.177)
Year fixed effects	Yes	Yes	Yes	Yes	Yes
Bank fixed effects	Yes	Yes	Yes	Yes	Yes
N	790	790	794	783	796
R²	0.717	0.599	0.454	0.705	0.971
Panel B: First-stage
1–Predicted HHI	0.655^c (0.077)	0.655^c (0.077)	0.652^c (0.077)	0.659^c (0.078)	0.658^c (0.077)
Constant	0.541^c (0.080)	0.541^c (0.080)	0.542^c (0.082)	0.535^c (0.081)	0.533^c (0.081)

Notes. Standard errors are robust and reported in parentheses. ^a, ^b, and ^c indicate significance at 10%, 5%, and 1% levels, respectively