An Empirical Study On The Threshold Effects Of Loan Concentrtion And Bank Risk

Loan is one of the most traditional and important business of commercial banks.The reasonable allocation of credit resources has a significant impact on the bank risk and economic development,so it is necessary to research on the credit concentration risk.Data show that China's commercial banks have varying degrees of loan concentration,how does loan concentration affect bank risks?To address this issue,domestic and foreign scholars have done a lot of research both in theory and in practice,but the conclusions are not consistent,then this article from the new Angle of view of nonlinear to analyze the relationship between them.This paper first introduces the theoretical basis of loan concentration and bank risk,and loan concentration can be divided into two aspects:customer loan concentration and industry loan concentration.Analyze the current situation of loan concentration,and explore the cause of the loan concentration and the mechanism of the loan concentration on the bank risk.Then,we use 39 commercial banks from 2007 to 2014 as the research sample to establish a simple linear model,and then based on the simple linear model,respectively,add the loan concentration quadratic term and the interaction terms of size of the model,the results show that the loan concentration and bank risk may exist in the nonlinear relationship,and then put forward four hypothesis.Finally,respectively use customer loan concentration,industry concentration and size variables as threshold to establish threshold regression model in order to conduct empirical analysis.The empirical results prove the nonlinear hypothesis,and the main conclusions are:When use customer loan concentration as threshold variable,there is a single threshold,and the customer loan concentration has different effects on the risk of the bank while before and after the threshold;When use industry loan concentration as threshold variable,there are two threshold,the optimal range of industry loan concentration can inhibit the risk of bank,instead will increase banks' risk.When use asset scale as threshold variable,there are two threshold,which indicates that assets will affect the nonlinear relationship between loan concentration and the bank's risk.Loan concentration have different influence on the bank's risk for different size of banks.Finally,according to the research conclusion and in combination with the practical situation of our country's loan concentration,this paper puts forward the corresponding policy recommendations.