| For a long time,C hina's commercial banks have maintained a business model that relies on traditional deposit and loan business.However,with the completion of market-based reform of interest rates,the rise of Internet finance,and the increase in financial liberalization,C hina's banks are facing increasingly fierce market competition.The narrowing of the profit margin of traditional interest business has prompted commercial banks to start diversifying their businesses.However,as the development of income diversification in C hina's commercial banks is still in its infancy,the overall degree of diversification is low.Besides,different businesses always have different risk attributes.Therefore,there's a complicated relationship between income diversification and operating risk.The effect of income diversification on operating risk of China's commercial banks has become a hot issue.This paper takes the data of 128 commercial ba nks in C hina from 2009 to 2018 as the research sample,builds a dynamic panel model and adopts the system GMM method to examine the effect of the income diversification on banks' risk and its channels.At the same time,the sample banks are divided into fo ur categories for group regression: state-owned banks,joint-stock banks,urban banks and rural banks.In addition,this paper also introduces the variable of executive compensation to analyze whether it has a moderating effect.The estimation results show that:(1)The income diversification of state-owned banks and joint-stock banks leads to rising operating risk through increasing asset portfolio risk and leverage risk;the income diversification of rural banks can reduce risk.(2)The increase in foreign exchange income can increase the overall risk of commercial banks while the development of commission income helps to diversify rural banks' risk.(3)Executive compensation can strengthen the degree to which income diversification increases operating risk in joint-stock commercial banks. |
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