An Empirical Study on the Profitability of Chinese Commercial Banks — Based on Factor Analysis

Hu, Yujun

doi:10.18282/ff.v9i4.1537

Cited by 3 publications

(3 citation statements)

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“…Scholars generally choose two indicators, return on assets (ROA) and return on equity (ROE), to describe commercial banks' profitability. Lu et al (2013) used both ROA and ROE indicators to study the factors affecting Chinese commercial banks' profitability, and Hu et al (2018) used the ROA indicator to analyze the relationship between financial innovation and commercial banks' profitability. Taken together, ROA reflects the net profit created from total assets, whereas ROE reflects the value of the profit generated from net assets.…”

Section: Variablesmentioning

confidence: 99%

The Heterogeneous Impact of Fintech on the Profitability of Commercial Banks: Competition and Spillover Effects

Song,

Yu,

2023

Preprint

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Using annual panel data of 46 listed commercial banks in China from 2012 to 2021 and constructing a two-way fixed-effects model, this study empirically analyzes the competition and technology spillover effects of fintech on the profitability of commercial banks. The results show that (1) in the early stages of fintech development, the competition effect is larger than the technology spillover effect; thus, it is negatively correlated with commercial banks’ profitability. However, with the spread of innovative fintech, the technology spillover effects and commercial bank profitability will gradually improve. (2) The influence of fintech on the profitability of commercial banks differs. Compared to large commercial banks, fintech has more significant negative effects on small- and medium-sized commercial banks in the short run. However, the role of fintech for such banks will also grow in the future. The results of this study provide practical guidance for how commercial banks can respond to the fintech wave. To realize sustainable development of the banking industry, commercial banks should change their business philosophy and revenue model, vigorously improve their fintech innovation capability, differentiate their choice of fintech development routes, develop personalized customization with a focus on users, and ultimately realize digital transformation and upgrading.

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Section: Variablesmentioning

confidence: 99%

The Heterogeneous Impact of Fintech on the Profitability of Commercial Banks: Competition and Spillover Effects

Song,

Yu,

2023

Preprint

View full text Add to dashboard Cite

show abstract

“…Scholars generally choose two indicators, the return on assets (ROA) and the return on equity (ROE), to describe commercial banks' profitability. Lu et al (2013) used both the ROA and ROE indicators to study the factors affecting Chinese commercial banks' profitability, and Hu et al (2018) used the ROA indicator to analyze the relationship between financial innovation and commercial banks' profitability. Taken together, the ROA reflects the net profit created from the total assets, whereas the ROE reflects the value of the profit generated from the net assets.…”

Section: Variablesmentioning

confidence: 99%

Heterogeneous Impact of Fintech on the Profitability of Commercial Banks: Competition and Spillover Effects

Song,

Yu,

2023

JRFM

View full text Add to dashboard Cite

Using annual panel data of 46 listed commercial banks in China from 2012 to 2021 and constructing a two-way fixed-effects model, this study empirically analyzed the competition and technology spillover effects of fintech on the profitability of commercial banks. The results showed the following: (1) In the early stages of fintech development, the competition effect was larger than the technology spillover effect; thus, it was negatively correlated with commercial banks’ profitability. However, with the spread of innovative fintech, technology spillover effects and commercial bank profitability will gradually improve. (2) The influence of fintech on the profitability of commercial banks differed. Compared with large commercial banks, fintech had more significant negative effects on small- and medium-sized commercial banks in the short run. However, the role of fintech for such banks will also grow in the future. The results of this study provide practical guidance for how commercial banks can respond to the fintech wave. To realize the sustainable development of the banking industry, commercial banks should change their business philosophy and revenue model, vigorously improve their fintech innovation capability, differentiate their choice of fintech development routes, develop personalized customization with a focus on users, and ultimately realize digital transformation and upgrading.

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“…From this angle, the level of development presented by Chinese commercial banks has not been as competitive as those of its counterparts in developed countries. Some researchers maintain that OBI represents an important mechanism for enhancing Chinese banks' competitiveness at the global level [10]. The rapid development of financial technology has promoted the transformation and upgrading of commercial banks, making the proportion of off-balance-sheet business conducted by banks higher.…”

Section: Introductionmentioning

confidence: 99%

Will Off-Balance-Sheet Business Innovation Affect Bank Risk-Taking under the Background of Financial Technology?

Gao

Buitrago

et al. 2023

Sustainability

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Given the rapid development of financial technology, the off-balance-sheet business innovations of banks may potentially impact bank risk-taking. This issue is of great importance to commercial banks and financial regulators. This paper analyzed the relationship between off-balance-sheet business innovation (OBI) and Bank Risk-Taking (BRT) in Chinese commercial banks, as well as the mediation role of the Bank Agency Cost (BAC), the impact of a bank’s Internal Control Quality (ICQ) on this relationship, and the moderating role of Bank Competition (BCMP) by analyzing panel data from a sample of 130 Chinese commercial banks from 2009 to 2019. The results of this empirical exercise showed that (1) OBI has a significant negative correlation with BRT, evidencing that off-balance-sheet business innovation can improve bank risk management processes and enhance the bank’s operating performance, thereby reducing their willingness to transfer risks, restraining the BRT level. Compared with state-owned and joint-stock banks, OBI has a more significant inhibitory effect on BRT in urban and rural commercial banks. (2) BAC showed a mediation role in the relationship between OBI and BRT levels. Bank OBI can inhibit BRT levels by BAC reduction, demonstrating an effective mediation channel. (3) The degree of BCMP displayed a positive moderation effect on the relationship between the explained and explanatory variables, which means that, at higher BCMP levels, the inhibitory effect of OBI on BRT levels becomes more significant. (4) Additionally, this exercise also found that a bank’s ICQ can enhance the impact of OBI on BRT. The research contributions of this paper constitute an important theoretical significance and reference value for researchers exploring mechanisms that can improve innovation in the commercial banking industry and give importance to financial supervision and financial system risk control.

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An Empirical Study on the Profitability of Chinese Commercial Banks — Based on Factor Analysis

Cited by 3 publications

References 0 publications

The Heterogeneous Impact of Fintech on the Profitability of Commercial Banks: Competition and Spillover Effects

The Heterogeneous Impact of Fintech on the Profitability of Commercial Banks: Competition and Spillover Effects

Heterogeneous Impact of Fintech on the Profitability of Commercial Banks: Competition and Spillover Effects

Will Off-Balance-Sheet Business Innovation Affect Bank Risk-Taking under the Background of Financial Technology?

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