Research On The Impact Of Internet Finance On Bank Risk Taking And Its Threshold Effect

As a new financial industry,the development of internet finance has been highly valued by the government and relevant departments.Since 2014,it has been written into the Report on the Work of the Government for five years consecutively.With a small scale,its impact is little initially.Since 2013,with the emergence of financial products like Yu Ebao,and P2 P network lending volume rising steadily,and third-party payment becoming popular,the Internet finance has already grown up.By 2017,China’s total monetary fund has exceeded 6.5 trillion.The online lending has also achieved considerable results.Since the first online lending platform was launched in 2007,the number of online lending platforms and the scale of its transactions have increased sharply.In 2013,the annual transaction of the online lending was just 105.8 billion.Only four years,the annual transaction reached 2804.8 billion.Third-party payment has been integrated into all aspects of life,and its scale has exceeded 140 trillion by the end of 2017.Essentially speaking,internet finance is still the category of finance,the difference is that its business mainly relies on internet.Therefore,it is inevitable to form competition with traditional commercial Banks.Presently,internet finance has formed an diversion to the liability side of commercial Banks obviously,and pushed up the cost of liabilities.Considering that the asset side is dislocation competition,the influence is slightly small.With commercial banks gradually pay more attention to the long tail customers,and internet finance business’ boundaries broadening,the influence of the asset side has become prominent.Besides,the income of intermediary business is also impacted to some extent.For example,the third-party payment has reached the traditional consignment business,and the previous consignment business has also been penetrated by the Internet finance.However,it is undeniable that banks have actively embraced internet technology,actively built their own electronic channels,and used big data technology to enhance their risk control ability,which has improved their competitiveness to some extent.So how does Internet finance affect commercial banks? What is the impact of these effects? As an important part of China’s financial system,commercial banks have become a hot research direction for many scholars.Scholars mainly focused on qualitative analysis of the impact of Internet finance on traditional commercial banks early.With the improvement of research methods and theories,coupled with the precipitation of data,researchers turned to empirical perspectives.Through the existing literature,it is found that the current research involving the impact of internet finance on the risk exposure of commercial banks focuses on the following two aspects: first,through a single dimension of internet finance development,such as peer-to-peer network lending or third-party payment,and studying its impact on commercial banks;second,exploring whether banks are heterogeneous when facing internet financial shocks,and through dividing banks into several kinds or introducing dummy variables for group regression to empirical.Viewing the above research status,this paper thinks that there are three areas that can be improved.Firstly,there are inextricable links between different aspects of internet finance,which should be studied as a whole.Owing to third-party payment,online lending platforms is growing more and more rapidly.In addition,the emergence of Internet wealth management products such as the balance treasure currency fund is the most direct derivative of third-party payment.Secondly,previous studies have ignored or paid little attention to the micro-characteristics of bank,such as capital adequacy ratios and asset size.Facing internet finance,whether the differences in microfeatures of banks will make them sensitive.Considering the comprehensive impact of asset size on bank business model and investment decision-making,this paper uses it as a threshold variable to empirically test whether banks of different scales have significant differences when facing internet financial shock.Finally,there is also improvement in the samples selected in previous studies.The shortcomings of the sample are mainly reflected in the time span.For example,Liu Zhongyu(2016)uses a time interval of 2003-2014,and Gu Haifeng and Yang Lixiang(2018)have a time span of 2007-2016.These time intervals cannot capture the traces of internet finance development.In this paper,we use 49 commercial banks in China from 2006 to 2017 as samples,focusing on the impact of Internet Finance on bank risk-taking,and further analyzing the threshold effect of asset size.Firstly,this paper analyses the theoretical mechanism between Internet finance and risk-taking of commercial banks,and discussing from both positive and negative aspects,and establishes a theoretical model for demonstration.Risk-taking is measured by the ratio of weighted risk assets.The Internet financial index constructed by text mining method and factor analysis method is used as the core explanatory variable to establish static model,dynamic model and threshold model for analysis.For the static model,we select one from mixed regression,fixed effect and random effect firstly,and the fixed effect model is selected for preliminary analysis.Considering the characteristics of endogenous and dynamic continuity of risk,a dynamic panel model is established and estimated by generalized moment estimation.The above research shows that Internet finance has a significant positive impact on commercial banks’ Risk-taking,and there is a single threshold effect with asset size as the characteristic variable.The larger the bank’s size,the impact of Internet finance on risk-taking is more sensitive.