Medium-sized Commercial Banks Research Articles

Market Competition, Non-Interest Income and Risk-Taking of Small and Medium-Sized Banks

ABSTRACT Taking the data of 61 small and medium-sized commercial banks in China from 2014 to 2021 as a research sample, this paper conducts an empirical study on the relationship between market competition and the risk-taking of small and medium-sized banks, and further considers the moderating role of economic policy uncertainty and non-interest business income. The results show that the intensification of market competition increases the risk-taking of small and medium-sized banks. Meanwhile, economic policy uncertainty dampens the positive effect of market competition on bank risk-taking, and commission income and other non-interest income have important mediating effects in the relationship between market competition and bank risk-taking.

Bank branching and corporate tax avoidance: evidence from a quasi-natural experiment of banking deregulation in China

ABSTRACT Using the small and medium-sized commercial banks’ market entry reform policy implemented in 2009 in China as a quasi-natural experiment of banking deregulation, we examine its effect on corporate tax avoidance. Our empirical results show that banking deregulation significantly reduces corporate tax avoidance. Banking deregulation not only promotes the expansion of joint-stock banks and city commercial banks, but also increases the credit supply and bank competition in the region. Further tests imply that banking deregulation restrains corporate tax avoidance through two channels: alleviating financial constraints and strengthening external monitoring. Our paper sheds new light on the spillover effects from regulations in the banking sector to tax management behaviours in the corporate sector.

Research on Local Financial Risk Prevention Strategies from an Audit Perspective

Financial security is an important part of building national security, and financial risk prevention affects the level of social risk. Therefore, strengthening local financial auditing will play an important role in resolving financial risks. With the rapid development of the market economy, China's overall economic development is in good condition, and local finance is developing rapidly. However, under the phenomenon of good development, the risks faced by local financial institutions also increase, especially in small and medium-sized commercial banks and other local financial institutions. This study takes small and medium-sized commercial banks in Anhui Province, China as an example, and takes an audit perspective as the entry point to explore preventive measures for local financial risks, aiming to provide effective financial risk management solutions. This study has important theoretical and practical significance and can provide strong risk management guidance for local financial institutions.

Heterogeneous Impact of Fintech on the Profitability of Commercial Banks: Competition and Spillover Effects

Using annual panel data of 46 listed commercial banks in China from 2012 to 2021 and constructing a two-way fixed-effects model, this study empirically analyzed the competition and technology spillover effects of fintech on the profitability of commercial banks. The results showed the following: (1) In the early stages of fintech development, the competition effect was larger than the technology spillover effect; thus, it was negatively correlated with commercial banks’ profitability. However, with the spread of innovative fintech, technology spillover effects and commercial bank profitability will gradually improve. (2) The influence of fintech on the profitability of commercial banks differed. Compared with large commercial banks, fintech had more significant negative effects on small- and medium-sized commercial banks in the short run. However, the role of fintech for such banks will also grow in the future. The results of this study provide practical guidance for how commercial banks can respond to the fintech wave. To realize the sustainable development of the banking industry, commercial banks should change their business philosophy and revenue model, vigorously improve their fintech innovation capability, differentiate their choice of fintech development routes, develop personalized customization with a focus on users, and ultimately realize digital transformation and upgrading.

Fintech inputs, non-performing loans risk reduction and bank performance improvement

The function of Fintech is preventing and resolving financial risks, and the ability of small and medium-sized commercial banks to apply Fintech to resolve non-performing loan risks deserves attention. This paper uses as a sample the micro-survey data of 432 branches of the city commercial banks in Beijing from 2005 to 2022 and constructs an econometric model of the risk reduction effect of Fintech on non-performing loans.The findings are as follows.Firstly, Fintech inputs can significantly reduce the risk of non-performing loans. For every 1% increase in IT personnel inputs, software inputs, and hardware inputs, the non-performing loan ratio will reduce by 0.091%, 0.055%, and 0.024%, respectively. In other words, IT personnel inputs contribute the most to the reduction of non-performing loan risk, followed by software inputs.Fintech has a certain lag effect in alleviating the risk of non-performing loans in banks and tends to strengthen over time.Secondly, Fintech inputs has an indirect effect on banks' performance by reducing non-performing loan risk, And there is a positive feedback loop between Fintech inputs, non-performing loan risk mitigation, and improving performance. This effect is not significant in the current period but significant when lagged by three periods.Thirdly, Fintech inputs has a significant inhibitory effect on non-performing loans loans of concern and subprime. For every 1% increase in inputs in IT personnel, software, and hardware, concern will decrease by 0.263%, 0.358%, and 0.107%, respectively, while subprime will decrease by 0.115%, 0.216%, and 0.057%, respectively. Software and personnel inputs have a greater inhibitory effect on the above two types of loans than hardware inputs. Fourthly,mechanism analysis shows that data governance application, compliance enforcement, and internal control enforcement have a moderating effect on Fintech input's impact on banks' non-performing loan risk.

How Connected Is China’s Systemic Financial Risk Contagion Network?—A Dynamic Network Perspective Analysis

Modeling the effects and paths of systemic financial risk contagion is significant for financial stability. This paper focuses on China’s systemic financial risk from the perspective of dynamic networks. First, we construct a high-dimensional dynamic financial network model to capture risk contagion effects. Second, considering the ripple effect of financial risk contagion, we introduce and improve the basic model of the ripple-spreading network. Finally, small- and medium-sized banks and economic policy uncertainty are selected as the internal and external contagion source, respectively, to simulate the risk of ripple-spreading paths. The results show that financial contagion is more likely to occur within the same industry. The contagion triggered by internal shock first spreads within the same industry, and then to other industries. The contagion triggered by external shock first spreads to banks, then to diversified financial institutions, securities and insurance institutions, successively. Moreover, some small- and medium-sized commercial banks show strong abilities to spread risk ripples. The securities industry is the intermediary layer of the ripple network and plays a leading role in the ripple-spreading process. Therefore, systemic financial risk regulation should focus not only on large financial institutions but also on financial institutions with strong ripple effects. During major risk events, isolating risk intermediary nodes can cut off the paths of risk contagion and mitigate the impact on the whole financial system effectively.

Transformation and Upgrading Development Strategies of Small and Medium-sized Banks Under the Influence of Internet Finance

This paper comprehensively analyzes and compares the specific influencing factors of China's Internet finance policies on the current operation of small and medium-sized commercial banks, as well as the possible causes of the impact of China's Internet finance new policy on the transformation of small and medium-sized commercial banks, specifically analyzes the innovative transformation business practices of China Everbright Bank under the influence of the Internet finance new policy, and proposes to formulate relevant business transformation service countermeasures for small and medium-sized commercial banks. This paper first studies and analyzes the impact of Internet financial technology on the current digital business transformation and development direction of small and medium-sized commercial banks from the market perspective, the bank perspective and the regulatory perspective, and then analyzes the current external policy environment of Internet finance industry and the internal management environment of small and medium-sized state-owned commercial banks in China. Through different perspectives, it analyzes the advantages and disadvantages of traditional commercial banks, so as to propose relevant digital transformation countermeasures for small and medium-sized banks.

The effect of the disposal of non-performing loans on interbank liquidity risk in China: A cash flow network-based analysis

The scale of non-performing loans (NPLs) directly affects the credit risk of commercial banks, and a large range of loan defaults will also lead to the liquidity crisis. Furthermore, liquidity risk will transmit to other banks through the interbank network. A reasonable disposal mode of NPLs is not only of great significance to commercial banks themselves, but is also related to the liquidity risk of the whole banking system. This paper fully considers the characteristics of China's banking system and constructs a dynamic bank-centered multi-agent model (DBMM) to explore how the disposal of non-performing loans (NPLs) affects interbank liquidity risk based on the interbank cash flow network. The results indicate that the increase in the number of small and medium-sized commercial banks improve the whole banking system stability, however, the increase in NPLs from low-income debtors increases the liquidity risk. The disposal of NPLs plays an important role in maintaining the stability of interbank networks, and the stock-plus-loan mode can more effectively alleviate liquidity risk in China than the entrusted settlement mode. Liquidation repayment ratio of commercial banks has the most significant effect on the interbank network in China, and adjusting this proportion is an effective method to prevent liquidity risk. Moreover, compared with small commercial banks, large commercial banks have a stronger ability to resist liquidity risk, as they are established with capital injection by the government in China.

Research on the Influence of Financial Technology on The Profitability of Small and Medium-sized Commercial Banks

This paper analyzes the overall profitability of city commercial banks and agricultural commercial banks, analyzes how financial technology has an impact from the existing theory and impact mechanism, and establishes panel data in the empirical part for analysis, it is concluded that financial technology can promote the profitability of small and medium-sized commercial banks, but there is heterogeneity between urban and rural commercial banks, finally, the paper gives some suggestions on the healthy upgrading and transformation of small and medium-sized banks and how to regulate the use of financial technology by regulatory authorities.

Research on Bank Financial Risk Control Mechanism Based on KMV Model

Starting from the loan users, KMV model transfers the evaluation of credit risk from the perspective of banks to the perspective of repayment enterprises, and judges whether the lending enterprises have repayment ability as the basis for evaluating credit risk. Credit risk is the core risk faced by commercial banks. When the economic situation fluctuates, people's economic expectations will gradually change, and the behavior of borrowers will also change. This paper studies the financial risk control mechanism of banks based on KMV model. This paper studies the credit risk status of 11 listed banks in China from 2018 to 2021, in order to observe whether macroeconomic changes have affected them since the new normal of economy. The empirical results show that the volatility of large commercial banks in each year is obviously lower than that of small and medium-sized commercial banks. The fluctuation range of weighted average default distance of large commercial banks is obviously smaller than that of small and medium-sized commercial banks. The empirical results show that KMV model has strong credit risk identification ability. The smaller the average default distance of an enterprise, the greater the corresponding default risk.

Innovation and Development of Small and Medium-sized Traditional Banking Industry Based on Service Choreography Technology

In the financial services, under the tide of digital and traditional part of the small and medium-sized commercial Banks due to staff shortages, backward organization management system, such as weak information processing ability problem have to flinch, but transformation is the only way to the bank, so the small and medium-sized Banks is an urgent need to use the appropriate financial technology to complete the core business is the transformation of deposits, bank of distributed systems. The vigorous development of innovative technologies such as agency and service choreography can provide new solutions for traditional small and medium-sized banks.

Evaluating the Systemic Importance of China’s Banks via Adjacency Information Entropy

Information entropy can be utilized to assess the complexity of the Banking System and the uncertainty of association information between banks. Based on information entropy and the balance sheet data of 167 banks from 2011 to 2020, we proposed a centrality indicator based on Adjacency Information Entropy, then applied it to directed weighted and directed unweighted interbank networks to identify banks with systemically important status, and compared the results with those of traditional centrality indicators. The outcomes show that the results of centrality indicator based on Adjacency Information Entropy are more accurate than those of traditional centrality indicators in identifying banks with systemically important status in interbank networks. Six large state-owned commercial banks, nine joint-stock commercial banks, two policy banks, and two urban commercial banks with large assets are identified as systemically important banks based on the proposed centrality indicator, which is highly consistent with the list of systemically important banks published by the Chinese banking regulator. Among the systemically important banks, changes in systemic risk levels of joint-stock commercial banks and urban commercial banks are more susceptible to national policies than those of large state-owned commercial banks. The findings of this paper have certain reference significance for strengthening the supervision of banks with systemically important status in interbank networks and formulating targeted policies for regulating large commercial banks and small- and medium-sized commercial banks.

Research on the Impact of Green Credit on the Financial Performance of Commercial Banks

From the perspective of green credit, this paper makes a theoretical analysis of the impact of green credit on the financial performance of commercial banks. Based on the panel data of 15 commercial banks from 2012 to 2018, this paper makes an empirical analysis on the impact mechanism is empirically analyzed. The results show that in the short-term, green credit has a negative impact on the financial performance of commercial banks, and the adverse impact faced by small and medium-sized commercial banks is significantly higher than that of large commercial banks, showing a heterogeneous effect. This also reveals the effect of commercial banks in implementing green credit in commercial banks and reasons for low initiative and enthusiasm. In view of this, it puts forward specific policy recommendations for different types of commercial banks, and believes that they should effectively promote green credit business in terms of differentiated policy guidelines and increasing the training of interdisciplinary talents.

Research into the Mechanism for the Impact of Climate Change on Systemic Risk—A Case Study of China’s Small- and Medium-sized Commercial Banks

Climate change is one of the gravest threats facing human society today, as well as an important factor for financial stability. This study takes 11 small- and medium-sized listed banks as subjects, measures the banks’ systemic risk using the CoVaR model and climate change using daily average temperature, and explores the mechanism between these two factors. Additionally, it investigates the influence of climate change on systemic risk in commercial banks through intermediary variables (e.g., commercial banks’ loan-deposit ratio, NPL ratio, and net interest margin). The results are as follows: (1) There is a positive correlation between climate change and systemic risk in banks within the confidence interval. (2)The indirect effect of climate change on systemic risk in banks through the NPL ratio is significantly positive, meaning that climate warming increases the NPL ratio and therefore increases the banks’ systemic risk.

Determinants of economic value added (EVA) in Chinese listed banks

Purpose The purpose of this paper is to examine the determinants of the EVA performance evaluation model for the Chinese banking industry. The authors investigate the impact of six bank-specific factors and corporate governance factors on financial performance. Design/methodology/approach The authors use the ordinary least square regression to examine the determinants of the EVA performance evaluation model for the Chinese banking industry. The findings are generally robust to alternative proxies of performance. Findings The empirical results indicate that credit risk, operational efficiency and the degree of innovation are positively related to banks’ EVA while capital management has a negative impact on it. In addition, although board size and independent directors are not related to the bank’s EVA, from the perspective of the traditional performance evaluation indicators, executive compensation has a positive impact on the bank’s profitability. Research limitations/implications This paper has some limitations. First, due to the large number of adjustments to accounting items are required in the application of EVA when evaluating business performance, some items of the EVA model in this paper have been simplified, which may cause the bank’s EVA value to deviate slightly from the actual situation. Moreover, the sample includes only listed banks, so our results cannot generalize to non-listed banks, such as some small- and medium-sized commercial banks. Originality/value This paper contributes to the limited body of literature concerning the use and the determinants of EVA in emerging markets. The authors construct an EVA model which is suitable for China’s banks and reports comprehensive evidence on the drivers of EVA as a measurement tool.

Features of Assessing Bank Liquidity on the Basis of Mandatory Standards

Effective liquidity management is one of the key tasks of any credit institution. It is worth noting that in this area the Russian banking system has a great deal of specificity. The peculiarity is that about 70 % of the total number of credit organizations are small and medium-sized commercial banks. High dependence on external factors, high level of the resource base volatility makes this group of credit institutions a sector of high risk. In large credit institutions, liquidity management is often associated with the need of solving the problem of excess liquidity. Thus, any credit institution, depending on the specific conditions and the activity features, solves every day the task of effective management of the unbalanced liquidity risk. It is proposed to consider the features of assessing the liquidity of banks using the coefficient method (based on mandatory liquidity ratios) and assess the impact of adjustments used in calculating liquidity adjustment ratios.

Research on the Impact of Interest Rate Liberalization on the Profitability of China’s Listed Small and Medium Sized Commercial Banks

In 1996, The People's Bank of China (PBOC) established a national treasury bonds market and inter-bank lending market, marking that the official start of China’s interest rateliberalization. After 20 years of orderly developing, reform has entered the key stage. In October 23, 2015, the PBOC announced that it would no longer set the floating ceiling of deposit rate to commercial banks and rural cooperative financial institutions. Release the control of interest rate means that the entire banking industry will fall into a more intense competition, and the traditional mode of operation will suffer from more threats and challenges. Especially in China's small and mediumsized commercial banks, compared to the large state-owned banks, the capital accumulation is relatively weak, more limited business development, limited customer resources, lack of brand effect, so it is bound to face more difficulties.In empirical research, the article selects 11 listed small and mediumsized banks as the research samples, using panel data model to analyze how the interest rate liberalization impact the profitability of these selected banks. Finally, combining with analysis results, the article proposes some measures to increasing the profit space of small and mediumsized commercial banks under the process of interest rate liberalization.

Study on the IT Service Evaluation System in ITIL-based Small and Medium-sized Commercial Banks

With the application of ITIL in IT services of small and medium-sized commercial banks, whether the improvement of IT service has been fulfilled is the key to successful introduction of ITIL. However, the mature IT services index evaluation system and methods for the small and medium-sized commercial banks have not been established. This research aims to establish the stakeholders’ satisfaction evaluation system of ITIL project based on KPI of ITIL management, which has strong pertinence and operability. The author has utilized the BP network based on GA optimization to conduct evaluation because the types of indicators are numerous and some of them are difficult to be quantized. Firstly, the author gains the precious model by means of the selected indicators and results of evaluation within 10 small and medium-sized commercial banks and GA-BP model. Afterwards, the indicator evaluation results of four of them are tested. The results of evaluation perfectly fit the expert evaluation results and the precision and convergence speed of the model are higher than that of the random BP, therefore, it is applicable to obtain stakeholder satisfaction of ITIL projects via GA-BP model and commendably satisfy the demands for evaluation of ITIL on basis of IT service level of small and medium-sized commercial banks.

The Influence of Corporate Culture on the Core Competitiveness in China’s Small and Medium-Sized Commercial Banks

The small and medium-sized commercial Banks in the financial system reform in our country plays a very important role, enterprise culture construction is one of the important factors that influence its core competitiveness. To strengthen the construction of enterprise culture, enhancing core competitiveness of small and medium-sized commercial banks focus to strengthen the cohesion, innovation of commercial Banks,to control and influence.Small and medium-sized commercial banks can continue to strengthen enterprise innovation power,quick to adapt to changes in industry environment;Establish the advanced mechanism of choose and employ persons, the "people-oriented" enterprise values; Establish a good brand image, enhance the social influence of establishing effective enhance the core competitiveness of enterprise culture cultivation.

An examination of interest rate risk of mercantile banks in China

The paper uses econometric analysis to estimate the average asset and liability maturities for Chinese commercial banks. Regression models are then tested to determine if interest rate fluctuations have a significant impact on banks’ net interest income. The researchers conclude that Chinese commercial banks are currently exposed to considerable interest rate risk, the exposure of medium-sized commercial banks being much larger than the exposure of larger banks, and that interest rate risk mitigation will become a strategic focus of private commercial banks in China’s financial markets in coming years.