The Nonlinear Analysis Of Factors Affecting Profitability Of Commercial Banks

At present,the home and foreign research has reached a consensus that treat financial innovation and risk tolerance of commercial banks as two important factors affecting profitability.However,can financial innovation promote commercial banks to attain profit model transformation and profitability strengthening;what is the relationship between financial innovation,risk tolerance and profitability of commercial banks?due to the limitations of research purposes,the keystong of attention,estimation methods and model selection,there are remarkable divergence in the research conclusions of domestic and foreign literature.However,under the background of the sharp decline in the profitability of China's major commercial banks,leveraging statistical methods to systematically and specifically explore the relationship among financial innovation,risk tolerance and profitability of commercial banks will have strong theoretical and practical significance involves implementing correct profit-inducing strategies for commercial banks,strengthening the profitability of commercial banks,and putting high value on the positive pulling effect of financial innovation on the profitability of commercial banks.Concentrating on these academic problems,this paper first probes the theoretical progress related to financial innovation,risk tolerance and profitability of commercial banks,and analyzes their respective development status;and then theoretically further explain the non-linear regional transfer mechanism between commercial banks'financial innovation,risk tolerance and profitability on the base of theory analysis and proposed our research hypotheses.At last,using the annual panel data of 23 commercial banks listed in China's A-share market for 2006-2016 to establish a panel threshold model,in which the risk tolerance of commercial banks is used as a threshold variable,to empirically verify the non-linear relationships among the three variables.The results of the paper show that:Firstiy,whether the full-sample commercial bank or the classified commercial bank,a double-threshold effect,which is based on the risk tolerance,exists in the extent and direction of the impacts of financial innovation on the profitability of commercial banks;the excessive financial innovation has an inhibitory effect on the profitability when the risk tolerance of commercial banks is relatively weak;the moderate financial innovation can enhance the profitability of commercial banks when the risk tolerance reaches and exceeds the critical threshold.It's also found that the risk tolerance has a direct positive effect on profitability,given other conditions,improve risk tolerance can significantly enhance the profitability of commercial banks.Finally,due to the different risk tolerance,the specific effects of financial innovation on the profitability of various commercial banks are also different.Particularly,for state-owned commercial banks,joint-stock commercial banks,city commercial banks and rural commercial banks,appropriate financial innovation can dramatically enhance their profitability when their risk tolerances reach 4.8380,4.5280,5.5730,and 4.7530,respectively.Finally,according to the research conclusions,a series of policy recommendations are proposed to prompt the financial innovation of commercial banks could enhance their profitability,improving the risk tolerance and prevent financial risks.