Research On The Impact Of Market Competition On Commercial Banks’ Risk-taking

With the continuous opening of China’s financial industry and unceasing developing of interest rate marketization and Internet finance,the structure of China’s banking market is gradually changing from monopoly to diversified competition.Deposit-to-loan spreads gradually narrowing,the way of competition among banks is gradually changing from institutional expansion to price competitionand business innovation,and banks begin to shift to diversified business income structure.Therefore,based on the background of interest rate liberalization,this thesis introduced the mechanism of how competition affects banks’ risk-taking,under the intermediary effect of non-interest income.This thesis will help banks to compete in a healthy way and avoid high monopoly or excessive competition in the market,which will lead to excessive bank risk-taking and instability of the financial system.Firstly,based on literature review,this thesis expounded the theoretical basis of competition affecting bank risk-taking.Then this thesis analyzed the influence mechanism of competition on bank risk taking from the three theoretical effects of franchise value,risk transfer and marginal profit,and put forward the research hypothesis.Secondly,this thesis adopted the semi-annual panel data of 45 listed commercial banks in China from 2010 to 2021 to build a dynamic panel GMM model,and empirically tested the direct and indirect effects of competition on bank risk-taking.The main conclusions are as follows: First,there is a "U-shaped" non-linear relationship between competition and bank risk-taking,and the Lerner index of the loci is 0.3698,and63.64% of the Lernerindex falls to the left,indicating that China’s banking industry as a whole presents the stage characteristics of "competition-stability".Secondly,when the degree of competition changes from weak to strong,or even excessive competition occurs,the proportion of non-interest income increases first and then decreases.Then non-interest income plays a non-linear mediating role in the relationship between market competition and bank risk-taking.Thirdly,Interest rate marketization plays a regulatory role in significantly strengthening the relationship of competition and bank risk-taking by acting on competition and non-interest income.Fourthly,competition has a more significant impact on the risk-taking of small and medium-sized commercial banks,commercial banks with high leverage ratio and low profit level.Finally,put forward relevant policy suggestions.The innovation of this thesis is reflected in three aspects.First,from the perspective of the income structure of banks,based on the perspective of the non-linear intermediary effect of non-interest income,this thesis deeply discussed the internal mechanism of the "U-shaped" non-linear relationship between competition and bank risk-taking.Based on the research hypothesis,this thesis empirically analyzes the non-linear direct and direct effects of competition on bank risk-taking,and more completely outlined the mechanism of competition’s influence on bank risk-taking.Second,combined with the background of interest rate marketization,using moderated mediating effect model,this thesis verified that interest rate marketization will have a regulatory effect on the mechanism of "competition-non-interest income-bank risk-taking".Finally,the heterogeneity of the impact of market competition on the bank risk-taking was investigated from three aspects: different scale,leverage ratio and profitability.