Research On The Effect Of Internet Finance On Commercial Bank’s Risk In China

In recent years,the booming development of Internet finance has revitalized the traditional financial industry.The emergence of Internet finance has changed the traditional pattern of financial industry.It has played a great role in promoting finance to nurture industry,reducing market transaction costs and providing more high-quality financial services for the common people.In the face of the transformation of financial service mode initiated by Internet finance,commercial banks with monopoly status have been influenced to some extent.In the face of the competitive pressure brought by Internet finance,commercial banks began to seek their own transformation and upgrading paths to strengthen their market competitiveness and status.At the time of profound changes in the financial industry,whether the development of Internet finance would bring negative effects to commercial banks and increase their risk have become questions with research significance.This paper would analyze and study the above questions from theoretical and empirical perspectives.This paper firstly reviewed the relevant literatures about Internet finance and commercial banks,summarized the development situation of Internet finance in recent years,then analyzed the influence mechanism of Internet finance on the risk of commercial banks and put forward a hypothesis.Finally,the hypothesis was tested by empirical analysis.This paper used the micro data of 91 commercial banks from 2011 to 2017 as samples for empirical research.It was indicated by the result that there was a non-linear inverted u-shaped relation between Internet finance and commercial bank’s risk.In the early stage,the negative effects of Internet finance on commercial banks were dominant,which increased the risk of commercial banks.With the technical advantages of Internet finance spilt over gradually,commercial banks,while drawing on the spillover strengths in combination with their own traditional benefits,would gradually gain an edge with second-mover advantage.The overall impact of Internet finance on commercial banks would gradually change from negative to positive,which reduced the risk of commercial banks.Further analysis showed that the impact of Internet finance on the risk of commercial banks was heterogeneous.Internet finance had nonlinear inverted u-shaped influence on the risk of national joint-stock commercial banks and urban commercial banks.However,rural commercial banks were not significantly affected by the negative effects,mainly benefiting from the positive effects brought by Internet finance.On the whole,there was a linear relation between Internet finance and risk of rural commercial banks.Combined with the results of theoretical and empirical research,the corresponding policy suggestions were given,which would help create a pattern of good rivalry and cooperation between Internet finance and commercial banks,optimize the structure of the financial industry and promote economic development.