Research On The Impact Of Competition On Risk Taking Of Commercial Banks In China

Since the financial liberalization reform rised in countries all over the world from 1970 s, the competition in banking industry is increasingly fierce. In recent years, our country has noticeably accelerated the pace of interest rate liberalization reform. In 2013 July, The central bank fully liberalized the lending rates regulation of financial institutions, which marked China’s interest rate liberalization reform has entered into a new stage. Therefore, in the process of deepening the reform of China’s banking market, the promotion of competition degree in China has injected vitality and efficiency into the banking industry at the same time, it also brings new challenges for the sustainable and steady development of China’s financial system.First of all, the paper briefly analyzed the market competition situation and bank risk taking in China. Secondly introduces the measure of market competition and risk index and analyzes the measurement results of our country. Then on this basis, by using panel data of 27 commercial banks in China from 2000 to 2013, the paper made an empirical analysis on the competition and risk of China’s banking industry. The results show that: the relationship between Lerner Index and China’s banking credit risk presents a very significant U-shape, In addition, through the calculation of inflection, we found a significant positive correlation between the competition and the credit risk of banks in China, It means as market competition intensifies, China’s commercial banks tends to take more and more credit risk. But the impact of market competition on the overall risk of commercial bank system in China is not significant. It is also found that the influence of the competition on the risk taking of different levels of commercial banks in China has large differences. The risk taking behavior of large state-owned commercial banks is not sensitive to the competition, while the risk of joint-stock banks and city commercial banks showed a strong sensitivity with the market competition in the sense of statistics.