Research On The Impact Of Commercial Banks’ Liability Structure On Risk-taking Behavior: International Empirical Evidence

Commercial banks occupy an important position in the country’s economic activities and financial system.Most of the global commercial banks are facing a slowdown in deposit size growth due to the global economic slowdown,increased competition in the banking market,and increased investment options for depositors.When the single deposit business cannot meet the banks’ funding needs,banks resort to nondeposit liability instruments including repurchase agreements,long-term certificates of deposit and interbank lending to finance their business.With the development of non-deposit liability business,the impact of commercial banks’ liability structure on risk-taking behavior has attracted much attention from academia and the industry.Unlike the accelerated contraction of non-deposit liabilities in the U.S.banking industry since the 2008 financial crisis,commercial banks in China have generally tended to expand their financing channels through non-deposit liabilities in recent years,and non-deposit liabilities are squeezing the share of traditional deposit liabilities in the liability structure of commercial banks.This is due to the significant changes in the operating environment of commercial banks in China.With the economic restructuring,changes in the financial regulatory framework and the rapid development of financial technology,commercial banks in China have accelerated the pace of change,actively adjusting their asset and liability structures and innovating liability business development models through various channels.However,the possible negative impact of the phenomenon of increasing the proportion of non-deposit liabilities on the risk-taking behavior of commercial banks cannot be ignored.Therefore,this paper discusses how the liability structure of commercial banks affects their risk-taking behavior from a global perspective,which can help provide reference for the risk control and stable development of commercial banks in China.This paper focuses on the impact of commercial banks’ liability structure on risk-taking behavior.In the theoretical analysis,this paper explores the transmission mechanism and the inner mechanism of the liability structure affecting the risk-taking behavior of commercial banks to build the theoretical basis for the empirical analysis.In the empirical study,this paper selects the panel data of 2128 commercial banks worldwide from 2011-2021 and establishes a static panel model to study the impact of commercial banks’ liability structure on risk-taking behavior.The findings show that:(1)The higher the sum of non-deposit liabilities or interbank deposits and borrowings and bonds,the higher the risk-taking behavior of banks,i.e.,an increase in the proportion of non-deposit liabilities of commercial banks will increase their risk-taking behavior.(2)Compared with smaller banks,the increase in the share of non-deposit liabilities in the liability structure has a more significant impact on larger commercial banks.(3)An increase in the share of nondeposit liabilities in the liability structure further reduces banks’ profitability by increasing their risk-taking behavior.The insight from the above findings is that commercial banks in China should optimize their liability structure and develop non-deposit liability business within a reasonable range,while the regulator should strengthen the management of commercial banks’ risk-taking behavior and establish a differentiated and sustainable risk control system.The main innovations of this paper are:(1)New research methods,based on the analysis of the current situation of foreign(represented by the United States)and domestic commercial banks and the case study of the Baoshang Bank incident,this paper improves the relevance to the actual banking industry in the argumentative process and strengthens the practicality of the argumentative results.Various approaches such as static panel regression and group regression are used in the empirical analysis,and robustness tests are conducted through 2SLS estimation to alleviate the endogeneity problem.(2)New research data,this paper selects data of 2128 commercial banks in more than100 countries worldwide for empirical analysis.Most of the existing research results are based on the data sets of individual countries for empirical analysis,and the overall study of the global sample is insufficient.In this paper,the analysis is based on a global perspective,which improves the generalizability and convincingness of the results.(3)New research perspective: While previous literature focuses on the impact of commercial banks’ liability structure on risk-taking behavior,this paper further proposes a hypothesis to explore whether the impact of changes in commercial banks’ liability structure on risk-taking behavior varies across banks of different sizes and whether such impact leads to changes in profitability,in order to provide more practical reference for commercial banks’ operation.