Research On The Impact Of Income Diversification Of Chinese Commercial Banks On Business Performance

With the progress of our country’s interest rate liberalization reform and financial disintermediation,the deposit and loan interest spread in the banking industry has narrowed significantly,and the profitability and market position of commercial banks have received significant impacts and challenges;at the same time,the financial needs of Chinese residents are no longer limited to the basic banking business in the past,the willingness to maintain and increase asset value is becoming stronger.Against this background,in order to continue to maintain market competitiveness,more and more commercial banks began to reduce their dependence on traditional interest margin business,and continued to explore noninterest business,forming a new trend in the field of bank operations.However,can commercial banks’ pursuit of income diversification really improve performance? If income diversification improve business performance indeed,does this rule apply to all types of commercial banks? Do the various sources of non-interest income have the same impact on business performance? None of the above questions have been answered definitively.Therefore,studying the above three issues can provide important reference for the operation and management practice of the banking industry.First,this dissertation sorts out the relevant literature on bank diversification in the past,summarizes three types of representative views on this topic,and puts forward research hypotheses on the basis of relevant theories.Second,selects financial data of 37 commercial banks from 2010-2020 to form panel data,uses panel fixed effect model to test the “Inverted U shape” relationship of income diversification and business performance,and take natural logarithm of asset size as the threshold variable,uses Hansen panel threshold regression model to test the impact of income diversification on business performance,divides the full sample into above-scale and below-scale commercial banks.Then,the above-scale commercial banks are used as samples to study the specific impact of different noninterest income on business performance.Finally,summarizes the main conclusion of the empirical part,and make relevant suggestions to different subjects.The main conclusions of this dissertation are as follows:(1)There is no "Inverted U-shaped" relationship between the level of income diversification and business performance.(2)There exists conversion effect between the relationship of income diversification level and business performance with the natural logarithm of total assets as the threshold.For commercial banks above designated size,improving the level of income diversification will promote business performance.(3)For the sample of commercial banks above designated size,fees and commission business can significantly improve business performance,but not for net investment income.The main innovations of this dissertation are:(1)The sample data is the latest financial data from 2010 to 2020,which enhances the timeliness and credibility of the empirical results.(2)Uses threshold value in sample classification to reduce the subjectivity of classification.(3)When calculating the proportion of non-interest income,excluding foreign exchange gains and losses and other parts that are less relevant to the bank’s diversified operations,to enhance the interpretability of the indicators.(4)Specifically studies the impact of different components of noninterest income on business performance,and enhanced the comprehensiveness of the impact mechanism analysis.