Research On The Effect Of Diversification On The Stability Of Commercial Banks In China

In the context of financial deepening,commercial banks are expanding its business scope to enhance operational efficiency.With the expansion of business scope,the risk involved will be more extensive,and the risk of the linkage effect between businesses is likely to be more significant,which will bring new challenges to the stability of commercial banks.The soundness of commercial banks is a comprehensive concept,which covers many aspects of business operation.The conduct of a business has the pros and cons on the development of commercial banks,which depends on the circumstances.Specific to the diversification,the effect on the stability needs to be adjusted according to local conditions.This article carries on the analysis from two levels.First of all,it makes a detailed analysis of the diversified operation of commercial banks,and expounds comprehensively the theoretical basis,practical situation and characteristics of diversified management of commercial banks.Secondly,ten indexes are selected from four aspects: asset quality,capital adequacy ratio,profitability and liquidity.The factor analysis method is used to extract the common factor.Then,the scores of each factor are combined to the index,which measures the stability of commercial banks.The index involves a wide range,so it can be comprehensive reflection of the operation of commercial banks.After analyzing the diversification and the stability of the commercial banks,the paper analyzes the relationship between the constituent parts of the commercial bank's robustness evaluation system and the diversified management from the qualitative point of view.On this basis,the paper analyzes the influence of diversification of income,diversification of loans,diversification of deposits and other factors on the robustness of commercial banks by using the panel data of 12 listed commercial banks from 2006 to 2016 and establishing fixed effect model.Finally,based on the qualitative and quantitative analysis,the paper puts forward the corresponding policy recommendations.The results show that the diversification of incomes and the diversification of deposits are positively related to the robustness of commercial banks and the diversification of loans is just the opposite.In addition,the diversification of income has a weak effect on the robustness of commercial banks,and the promotion of loan diversification is the most obvious.After analysis,there are the following points: first,the income diversification have a positive effect on the stability of commercial banks but limited,because the diversification of commercial banks in our country is too much emphasis on the expansion of business scope and neglect of the quality,making the business income quality difference;second,the diversification of deposits play a positive role in promoting the robustness of commercial banks,which is related to the business characteristics of commercial banks;third,the negative effect of loan diversification on commercial banks' conservatism is short term,so it is still beneficial in the long run.In addition,the empirical analysis also found an important factor affecting,namely,the size of banks,which has a greater effect on the stability of commercial banks.