The Impact Of Diversification On Profitability And Risk Of Commercial Bank In China

Diversification strategies is one of significant way to improve the competitive capacity of an enterprise.Diversification strategies is regard as a method of risk-spreading and improving the capital efficiency.And the diversification strategies have created the abundant theory system and practice result.However,when researchers in the study on the diversification of enterprises,financial industry,especially banks,usually are left out the range of study.And because of the difference of research methods and data indicators,these achievements also have different conclusion.On account of the limited of our regulator,the short time and inadequate experience,this domain is still studied.At present,our country face with the “new normal”.With the global economic integration and financial integrated operation,the disinter-mediation,interest rate liberalization and Internet business are impacting to the profitability of banks.So it is significant for us to research the relationship between diversification strategies and profitability.After the year of 2000,the banks in our country have been joint-stock system reform,business transformation and introduction of foreign investors,these help banks are carrying out the diversification strategies.To sum up,this paper,which combines the background of China and the diversification theory,studies the diversification,profitability and risk.And the paper provides the general analysis of relationship of diversification and profitability,risk.Then,we give the research hypotheses.We chose panel data of 18 Chinese listed banks during 2008-2015 and concluded that: Diversification can decrease the Cost-Income Ratio of bank;meanwhile it can also make the risk higher.According to the theoretical analysis and the empirical test,the paper gives some suggestions: firstly the banks need advancing the diversification steadily,improving the profitability and then decrease the risk.Secondly the banks should disperse the shareholder concentration degree.Finally banks also need to find the differences to improve their overall competitiveness.For regulators,with the fiscal policy that will remain positive,banks who carry out the diversification need widening income channels.And the regulators need to ease the regulation standards and protect the environment of the financial market.The paper based on the data of Chinese listed bank came into an empirical conclusion that meets the specific social environment and capital market system in China,which is not only a supplement to the empirical research of commercial bank diversification,but also providing a strongly theoretical and practical guidance for the diversification strategy practice of Chinese commercial banks.