The Empirical Research On The Impact Of Bank Competition In The Loan Market On Credit Risk

The price competition of commercial banks is becoming more and more intense with the deepening of financial reform and finishing of interest rate marketization.In addition,Small and medium-sized banks are rising gradually,and private capital begins to enter the banking sector,bringing greater competition pressure on China's commercial banks.The competition can make banks serve the real economy better,but according to the domestic and foreign researches,the intensity of competition in the bank market will affect the risk of banks,and then will affect the stability of banking system.The rise of credit risk in China's commercial banks in recent years may also be related to competition.In this background,because credit behavior is the source of credit risk,it is of great theoretical and practical significance to study the impact of bank competition in the loan market on credit risk in China.Firstly,the paper discusses the domestic and foreign researches about relations between bank competition and risk systematically,and analyzes the main influence mechanism of bank competition in the loan market on credit risk theoretically.Then,the paper uses panel data of 34 commercial banks from 2006 to 2016 to do the empirical research.Lerner Index is used to measure the degree of bank competition in the loan market.It is found that the degree of China's bank competition in the loan market shows a trend of decline and then rise,and the state-owned commercial banks still occupy a monopoly position.The ratio of non-performing loans is used to be proxy variable of the credit risk to carry out the empirical study.The regression results show that there is a U-shaped relationship between the degree of bank competition in the loan market and credit risk.Through the calculation of inflection point,we found the effect,competition leading to the rise of credit risk,dominates in the current stage,and the degree of bank competition in the loan market and credit risk have positive relationship.In this paper,the classification of banks is also studied.The results show that the relationship between competition in the loan market and credit risk is different for the state-owned commercial banks,the joint-stock commercial banks and the city commercial banks.Finally,according to the research results,the paper believes that commercial banks should reduce price competition behavior,identify market orientation,strengthen diversification and improve credit risk management level,and relevant departments should work together with banks to create a fair and orderly competition environment.