The Impact Of Income Diversification On Commercial Bank Efficiency Of China

With the development of global economic into the transition period,as well as the implementation of marketization of interest rate and other financial policy,our country's banking industry is facing a new development situation.on the one hand,with development of economic into the new normal state,the real economy slowed down,the production and operation of the enterprise was greatly affected,and the risk of the traditional credit business of commercial banks was increased.On the other hand,with the full marketization of interest rate and the increasing of disintermediaton in the context of rapid development of Internet,making our country's commercial banks face more intense competition,as well as narrowing of interest rate spreads.In addition,since we enter into WTO,the economy of our country is more open,so the banking industry is also in a more open financial markets,the entry of foreign banks makes our commercial banks face greater competition pressure.These changes have brought serious challenges to the development of commercial banks,especially the traditional credit business-based profit model.Compared with the large commercial banks abroad,the profit structure of commercial banks in our country is relatively simple,and the income of foreign commercial banks is more diversified and balanced.The relatively diversified income structure makes the commercial banks face lower Profit volatility and income volatility,which provide a choice for our country's commercial banks development under the current situation.Most of the previous studies focused on the impact of income diversification on the single financial indicators of commercial banks.Bank efficiency reflects the core competitiveness of commercial banks,also reflects the ability of commercial banks in resource allocation and risk control.This paper analyze the relationship between income diversification and bank efficiency of 29 commercial banks throughout the year of 2008 to2015,expanded the existing research literature on the impact of income diversification on commercial banks.First,this paper reviews the domestic and foreign research on the efficiency of commercial banks and the diversification of commercial banks' income;Secondly,analyzes the influence mechanism of diversification on commercial banks efficiency from the aspects of commercial bank transition theory,innovation theory,portfolio theory and risk theory.Also analyzes the present situation of diversified income structure of commercial banks in our country.Then analyzes the bank efficiency measure models and selects Stochastic Frontier Analysis method.And measured the profit efficiency of 29 commercial banks in China from2008 to 2015.Finally,this paper measures the entropy index that representing the degree of income diversification of commercial banks,and introduces other factors that affect the efficiency of commercial banks,including the macroscopical factors,the industry level factors and the bank's own characteristic factors,and constructs the multiple quadratic regression model,and analyzes the impact of income diversification on the efficiency of commercial banks.The empirical results show that the effect of entropy index on bank efficiency is significant at 1% significance level,diversification of income structure is beneficial to the improvement of bank efficiency.At the same time,the quadratic coefficient of incomediversification index is significant Negative,indicating that the moderate diversification is good for the improvement of commercial banks efficiency,but excessive diversification will increase risk of commercial banks under the current macroeconomic situation and regulatory framework,thus undermining its operational efficiency.For further analysis,this paper introduces the interaction of income diversification index and Z value of commercial bank into the model,found that with the increase of income diversification,the optimization function of spread risk on commercial bank efficiency will gradually weaken.To a certain extent,explains why excessive diversification will undermining commercial banks efficiency.