The Study Of The Impact Of The Diversification Of The Income Structure On The Cost Efficiency Of China's Commercial Banks

With the implementation of the “Belt and Road” national strategy,the acceleration of the RMB internationalization process,and the way of money flow in the monetary and financial system have undergone major changes.At the same time,with the development of Internet technology,especially the rise of Internet financial products and mobile payment terminals,people's preferences for money demand have changed.Idle funds that traditionally flow into the commercial banking system have flowed to other financial institutions in large numbers,which makes it difficult for commercial banks based on net profit margin to sustain.For banks,changing the traditional income structure which relies on net interest margins,expanding non-interest income,and diversifying the income structure have become an inevitable choice for commercial banks to transform their business development.Cost efficiency,which reflects the relationship between input and output of commercial banks,is the embodiment of the bank competitiveness.The main use of diversification is the existing business channels of the bank.Commercial banks improve cost efficiency by improving the income structure,reducing marginal business costs,broadening income sources,and increasing operating income.Based on the income structure of diversification and its impact on cost efficiency,this thesis examines whether diversification can improve the cost efficiency of commercial banks,and analyze the effect of diversification management on different kinds of commercial bank,and finally proposes rationalized policy recommendations,providing reference for the development of commercial banks' business operation.This thesis consists of five parts: The first part makes a systematic review of the related literature on the diversification of income structure and cost efficiency of commercial banks,and analyzes the frontier theories and research trends.The second part explains the definition of income structure diversification and cost efficiency,illustrates the measurement method of cost efficiency,as well as analyzes income structure of diversification and its impact on cost efficiency in detail.In the third part,the 16 listed banks divided into state-owned banks and joint-stock banks.This part also analyzes their income structures respectively,summarizes the characteristics of China's commercial banks' income structure,and finally analyzes the factors affecting cost efficiency.In the fourth part,when measuring the cost efficiency level,a stochastic frontier analysis method(SFA)was used.Selecting 3 input variables and 2 output variables based on the intermediary approach.The three input variables are deposit price and labor price respectively.As well as fixed asset prices,the two output variables are total loans and non-interest income.Use the cost efficiency of 16 listed banks in China from 2009 to 2016 with SFA as explained variable.Take FOCUS,asset operating capability(OC),and capital resilience risk indicators(RC)as an explanatory variable to establish a regression model for empirical analysis of the full sample,state-owned banks,and joint-stock banks using Eviews 6.0 software.The fifth part gives corresponding policy recommendations through empirical analysis.The main innovation of this thesis is to study the income structure of diversification and its impact on cost efficiency from the perspective of a full sample.The selected banks are divided into two types: state-owned banks and joint-stock banks.The diversification of income structure on the cost efficiency of different types of commercial banks are studied separately.What's more,the Input-output indicators which uses SFA to measure the cost efficiency are different from the predecessors.Finally,through empirical analysis,the conclusions are:(1)The diversified income structure can improve the cost efficiency and has a greater impact on the state-owned banks regardless of state-owned banks or joint-stock commercial banks.(2)Under the full-sample bank and joint-stock bank sample,the improvement of operating capability will increase cost efficiency.Due to the large scale of the state-owned banks and the insufficiency of cost management capabilities,operating capacity has not been able to promote cost efficiency.(3)Under the sample of full-sample banks and state-owned banks,the improvement of operating capability will increase cost efficiency.The increase in capital adequacy ratio under the joint-stock bank sample will reduce cost efficiency.Excessively high capital adequacy ratios will affect the output of loans although it can help commercial banks to resist risks,thereby reducing cost efficiency.