The Impact Of Revenue Structure Transformation On Bank Performance And Risk

According to the classification method of Jiang Jianqing (2006), the revenue structure of commercial banks can be divided into three levels, which includes the income structure, profit structure and value structure.The purpose of this paper is to investigate the effect of income structure on China commercial banks performance and risk during the period of revenue structure transformation. Income structure is the most direct and clear structure among the three level of commercial bank’s revenue structure. Profit structure and value structure are also very important, however, given the lack of data or not easy to directly measure, considering the data availability, this article mainly want to study on the income structure, which is the first level of commercial bank’s revenue structure.The question this paper wants to answer is how the income structure changes impact on the bank’s performance and risk during the period of revenue structure transformation.The existing literatures about this issue can be divided into two different views.The empirical results of this paper show that NIIOI, DIV and NFCOI are significantly positively associated with ROA, which is regarded as a performance indicator of commercial bank. NIIOI and DIV have no significant effect on ROE, but NFCOI is significantly positively associated with ROE, which is regarded as another performance indicator of commercial bank.The empirical results of this paper also show that MNIIOI and MDIV are significantly positively associated with SDROA, which means higher risk. MNIIOI and MDIV are significantly negatively associated with ADZP1, ADZP2and ADZP, which also means higher risk. But MNIIOI and MDIV have no significant effect on SDROE and ADZ, which are regarded as risk indicators of commercial bank.Given all these empirical results above, we can draw a conclusion that the income structure changes increase the bank portfolio risk and leverage risk, but the income structure changes have no significant effect on insolvency risk.