The Research On Commercial Bank Diversification

With the deepening of financial liberalization and integration, financial innovation, finance mergers and acquisitions occur very frequently setting off a worldwide wave of financial diversification. Commercial banks transform their business ideas, innovative financial products and develop non-banking financial business in order to achieve the effectiveness of diversification. There are a lot of foreign researches but much less domestic researches about diversification of commercial banks. Most of the normative researches were qualitative researches, quantitative empirical studies were limited. Because of choosing different theoretical basis, research methods and different data, conclusions are different. Diversification of commercial banks of our country is carried out in the context of the coexistence of slow reform of system and rapid product innovation which needs comprehensive analysis of qualitative and quantitative methods to further study characteristics of the development of commercial banks in our country, the impact of diversification strategy on the profitability of commercial banks and future strategy. These studies will try to answer the questions about whether the commercial banks will continue to diversify and how to diversify. These will also provide some policy recommendations to regulatory authorities.Through qualitative analysis of the development of diversification strategy of commercial banks and quantitative analysis using the panel data model to study the diversification of commercial banks in positive and negative effects, we will explore whether diversification helps to improve their profitability and their operating conditions. We also made a categories discuss about the effectiveness of diversification on four state-owned commercial banks and eight joint-stock commercial banks.What we obtained by analysis were the special growth environment determined the special risk of diversification of commercial banks and the diversification of four major state-controlled banks improved their profitability and operating over the past decade when instead those eight joint-stock commercial banks improved their profitability and operating by reducing diversification. We finally draw these conclusions:joint-stock commercial banks should highlight the main business and practice diversification according to their strength; taking into account the characteristics of diversification of commercial banks in our country and lessons learned on U.S. sub-prime crisis, we must improve the regulatory regime and build a comprehensive risk management system.