Research On The Effect Of Financial Disintermediation On The Profitability Of Commercial Banks

With the global increasing of financial market, in China banking industry is not only facing the impact from domestic stock and bond market, but also needs to respond effectively to pressure the overseas financial market. Therefore, the problem of financial disintermediation has been highlighted gradually. However, to a certain extent it also brings new opportunities on the future development of the commercial bank. On one hand, as the traditional banks’business has been impacted, the bank’s interest income will be reduced somehow and it brings enormous challenges to the development; on the other hand, the bank can make the transformation through the shock by innovating the financial products and services and developing the mixed operation. Therefore, the circles of financial disintermediation in theory and practice have done a lot of research and discussions. But among the existing articles, quantitative research on financial disintermediation is relatively less. And the comparative study between different types of commercial banks in China is obviously insufficient either. Based on this, the paper uses sixteen commercial banks’data between2005and2012as a sample in order to study the effects of financial disintermediation on the banks’ profitability, under the background of market-oriented interest rate reform and joint-stock reform.This paper is divided into five parts. The first chapter mainly describes the definition of financial disintermediation and then introduces the practical significance and purpose of the research. The second chapter is the literature review part, which mainly makes the summary about the related research achievements at home and abroad. The third chapter analyzes the reason why this phenomenon appears under the current trend of financial disintermediation in our country, the features it have and the influence on the banks’ profitability from different angles. The fourth chapter is the key part of quantitative analysis. On the basis of former literatures, this paper fully considers the significance of this study and the availability of data to select the variables. Specifically, in the selection of variables, we use loans accounted for the proportion of banks’assets as reflection of the disintermediation on assets, deposits accounted for the proportion of banks’ debts to reflect disintermediation on debts and the ratio of the non interest income to measure the correcting disintermediation. At the same time, in order to measure the profitability of banks, we choose the Return on Assets. In addition, from the macro and micro perspective, we also select the growth rate of gross domestic product, ownership concentration and the scale of bank assets as a control variable. In the part of the model, the16commercial banks divide into three types as state-owned, joint-stock, city commercial bank and then establishes panel data model by using relative data. Then compare the results of regression results of these three types of banks and tell the differences. The fifth chapter is the conclusion of this paper and some suggestions on financial disintermediation.Through descriptive statistical analysis and model analysis in the chapter four, this paper mainly has some conclusions as follow. Return on Assets of the state-owned banks, joint-stock banks, city commercial banks and all banks and the cross terms of asset disintermediation and disintermediation correction have a negative change in direction, which indicates that the asset disintermediation has a very large the impact on commercial bank, even positive effects by the disintermediation cannot offset. While their Return on Assets and the cross terms of debt disintermediation and disintermediation correction have a positive change in direction, which indicates that the disintermediation correction positive effect not only fully offset the impact, but also enhance the profitability of commercial banks to some extent. In contrast to three kinds of banks, the paper finds that no matter it’s the beneficial effects or adverse shocks, the degree of the financial disintermediation effect on ROA of state-owned banks’are smaller than other two, and then the joint-stock banks. At the same time, the ROA of three kinds of banks are rising with the GDP growth rate increasing, which means that the good development of the domestic economy provides a better external environment for banks. In addition, the ROA and equity concentration change in the opposite direction, while it changes in the same direction with the scale of bank assets.