Empirical Research On The Relationship Between Competition And Risk In China's Commercial Banks

In recent years,with the acceleration of China's interest rate liberalization,banking reform,Renminbi internationalization and other financial reforms,as well as the financial disintermediation caused by the development of the capital market,it becomes difficult for commercial banks to continue the traditional business model based on deposit-loan interest difference.The establishment of private banks,the development of Internet finance,the promotion of interest rate market reform and other measures broke banks' traditional operating and income structure,increased competition among banks,and increased the efficiency of banking resource allocation,so commercial banks will face even more complex banking market environment.However,the stability of the banking system will be affected by the competitiveness of commercial banks,and banking is an important part of the financial industry,so it is more and more important to explore the relationship between commercial bank's competition and risk.In order to explore the impact on bank risks from changes in the competitiveness of commercial banks in China's banking industry,this paper first reviews the relevant literature at home and abroad,combs the theories of concession value,risk transformation and MMR theory.Second,we select the financial data of 16 commercial banks in China from 2007 to 2016,and analyze the current situation of the competitiveness and risk of our commercial banks.Moreover,using the Lerner index and the HHI index to measure the degree of competition in the bank,the z-index measures the level of bank risk,and use the fixed effect model to do the empirical test.The main conclusions are as follows.(1)The Lerner Index and HHI Index,which are the measures of competitiveness of commercial banks,are positively correlated with the Z index,i.e.bank risk index.The greater the degree of competition,the smaller the bank risk,which supports the theory of risk transfer.(2)Under the current level of income diversification,the enhancement of competition can effectively reduce bank risk.However,as the diversification of incomes increases,the role of bank risk reduction in raising bank competitiveness becomes increasingly weaker,and it can even increase bank risks eventually.(3)While the sample banks are grouped,the original conclusions are still supported,but small and medium-sized commercial banks still have much room for improvement in diversified revenue businesses.Finally,we put forward policy recommendations from both aspects of banks and the government.For banks,it is important to change their business structure,achieve differential development,optimize the governance structure and improve the level of decision-making.On the government front,it is important to encourage financial innovation within the framework of regulations,to enhance the overall service quality of banks.At the same time,it is important to actively support and develop private banks and optimize the banking market structure gradually.The main innovation of this paper is embodied in the following three aspects :(1)In calculating the marginal cost of commercial Banks,this paper adopts the estimation method of "three inputs and three outputs" to exceed the cost logarithmic function.(2)In the explanatory variable,the interaction between competition degree and income diversification index is introduced,and the impact of competition degree on bank risk varies with the change of income diversification degree.(3)This paper provides a new direction for the operation and development of commercial Banks,and provides new ideas and methods for the guidance and supervision of government supervision departments.