The Impact Of Bank Competition On Bank Efficiency

China's financial system is a typical bank-oriented type.Banks not only bear the responsibility of the transmission and execution of monetary and economic policies,but also the responsibility of maintaining financial system stability and good economic operation.Therefore,the banking industry plays an important role in China.The development of the economy is inseparable from the support of bank funds.The level of bank efficiency represents the bank's resource allocation capacity and the efficiency of capital utilization.All bank actions will have a more or less impact on bank efficiency.Among them,competition and innovation are particularly important.Therefore,the study of the relationship between the three has very important practical significance.This paper uses the method of theory and empirical to study the impact of bank competition on bank efficiency from the perspective of bank financial innovation.The main work as follows:First of all,this paper analyzes the relationship and mechanism between the three from a theoretical perspective.It is found that the relationship between the three has no consistent conclusions due to the complexity of the market and the diversity of influences.However,the development of China's banking industry is different from that of other countries.The development of the banking industry is relatively short,and the development of the bank is a process of continuous decline in concentration,continuous reduction of entry barriers,and continuous improvement in marketization.Therefore,this paper puts forward three hypotheses based on actual situation in China.Hypothesis H1:Bank competition can improve bank efficiency;Hypothesis H2:Bank competition can promote bank financial innovation;Hypothesis H3:Financial innovation can improve bank efficiency and play a mediating role in bank competition affecting bank efficiency.Then,in this paper,the HHI index calculated by total assets,total deposits,and total loans is used to represent inter-bank competition;Calculating bank efficiency with input-oriented DEA model with variable returns;and the non-interest income of banks as a percentage of total income represents bank financial innovation.Empirically,we use Wen Zhonglin's"three-step"model of,and multiple regression methods to empirically analyze the above three hypotheses.Then,by introducing dummy variables,the banks are divided into two categories,the top five banks are the first category,and the other banks are the second category.The differences in the impact of bank competition on the efficiency of different types of banks are studied.Finally,the concentration index CR₅is used instead of HHI and SFA is used instead of DEA to test the robustness of the empirical results.The CR₅ indicator also considers the concentration of the banking industry.The main innovations of this paper are as follows:Firstly,research on bank competition,banking financial innovation and bank efficiency under the same framework makes the whole logical chain more complete.Secondly,innovation plays an important role in various industries.However,due to its particularity,the banking industry has a complex impact on banks.Therefore,it is of great significance to conduct research from the perspective of bank financial innovation.Then,this paper fully considers the actual situation of China's banking industry when selecting indicators.The HHI index indicates that the degree of competition of China's banking industry is more in line with the characteristics of China's banking industry,and makes the research conclusion more robust.The main findings are as follows:Bank competition can significantly improve bank efficiency,and draw the same conclusions in both the full sample and the sub-samples;?2?Bank competition can promote bank innovation,but bank competition has no significant impact on the innovation of the five state-owned commercial banks.For other banks are significant at the 1%level.This shows that other banks have more innovative behaviors and higher enthusiasm in the face of bank competition;?3?Financial innovation in the entire sample played a mediating role in the impact of bank competition on bank efficiency.In the subsamples,since the results of the five major banks are not notable in the hypothesis H2,the sobel test is performed in the hypothesis H3,and the results show that there are also mediating effects in the subsamples.;?4?Bank competition has different degrees of influence on banks with different levels of financial innovation.Bank competition has a deeper impact on banks with higher levels of financial innovation.?5?The impact of bank competition on the efficiency of different types of banks is different,and the impact on the efficiency of the five major banks is greater than other banks.Moreover,all of the above results have passed the robustness test.