Small Commercial Banks Research Articles

Digital finance, bank competition shocks and operational efficiency of local commercial banks in Western China

The rise of information technology has triggered the digital financial revolution and reshaped the competitive landscape of the commercial banking industry. This transformation has profoundly affected the operating efficiency of many small and medium-sized traditional commercial banks in Western China. We combine panel data from 130 local commercial banks in Western China from 2008 to 2021 to investigate the impact of digital finance on the operational efficiency of these local commercial banks. Our findings indicate that the overall operational performance of local commercial banks in Western China has declined under the influence of digital finance. Additionally, the intensification of banking competition has disrupted the established traditional market competition structure, with this mechanism exerting a more pronounced weakening effect on the operational performance of these local banks. This research provides rational recommendations for the high-quality development of the banking industry in the Western region, thereby enhancing the quality and efficiency of commercial banks' services to the real economy.

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.

Fintech development, firm digitalization, and bank loan pricing

Using loan-level data of Chinese listed companies from 2011 to 2018, this paper finds a significant decrease in bank loan prices due to the regional development level of financial technology (fintech). For small and medium-size regional commercial bank lenders, a 1% increase in the regional fintech development level can reduce the spread of bank loans for local firms by 1.13 basis points. The reduction effect is greater for enterprises with more binding financial constraints and those headquartered in regions with a lower level of banking competition. In addition, this study discusses the policy effect of firm digitalization. The results show that firm digitalization can reduce bank loan prices directly while weakening the policy effect of fintech in reducing loan prices indirectly. To promote the coordination between fintech development and firm digitalization in reducing corporate financing cost, fintech enterprises should take the role of helpers of commercial banks rather than competitors.

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.

Does the availability of credit resources reduce corporate pollution emissions? Evidence from the geographic network of banks in China

ABSTRACT The impact of bank branch expansion on macroeconomic and micro-firm behaviour has been one of the primary focuses in related research fields. However, research has thus far ignored the unintended impact of the increased availability of credit resources on firms’ pollution emissions. Therefore, based on firm-level data in China, we explore the impact of the availability of credit resources on firm pollution reduction. The empirical results of this study are as follows. (1) Increased availability of credit resources to firms can significantly reduce pollution emissions. This finding remains robust after a series of robustness tests. (2) The possible path to reduced emissions is through increasing capital investment in production and technological innovation, rather than increasing capital investment in governance. (3) The market access policy for small and medium-sized commercial bank branches further strengthens the effect of credit resource availability on pollution reduction. And the reduction effect is more significant for firms facing strong environmental regulations and weak economic target constraints. These findings provide a new perspective for enterprises to reduce emissions.

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.

Digital financial and banking competition network: Evidence from China.

The rapid development of digital finance resulted in fierce competition in the banking industry. The study used Bank-corporate credit data to measure interbank competition based on social network model, and we transformed the regional digital finance index into bank-level digital finance index using each bank's registry and license information. Furthermore, we employed QAP (quadratic assignment procedure) to empirically test the effects of digital finance on the competitive structure among banks. Based on which, we verified its heterogeneity and investigated the mechanisms through which the digital finance affected the banking competition structure. The study finds that, digital finance reshapes the banking competition structure, and intensifies the inter-bank involution while increasing the evolution. The large nation-owned banks have been in central position in the banking network system, with stronger competitiveness and higher strength of digital finance development. For large banks, digital financial development has no significant impact on inter-bank co-opetition and is only more significantly correlated with banking weighted competitive networks. For small and medium-sized banks, digital finance has a significant impact on both co-opetition and competitive pressure. Meanwhile, digital finance also led to the increasing homogeneous competition. In addition, compared with large nation-owned banks, the competitiveness of small and medium-sized joint-equity commercial banks and urban commercial banks are more vulnerable to digital finance and resulting in homogenization problems. Mechanism analysis showed that (1) digital finance promotes the overall competitiveness of the banking industry by improving the inclusiveness of financial services, which expands the service scope (scale effect); (2) digital finance promotes the competition by improving the pricing ability, risk identification ability and finally the capital allocation ability of banks (Pricing effect). The above findings provide new ideas for the governance of banking competition and the realization of a new pattern of economic development.

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.

Research on Computer Intelligent Evaluation Model of the Impact of Green Credit on the Operating Performance Using Principal Component Analysis

Under the background of "carbon peaking and carbon neutrality goals", green credit has become an important financial strategy to support green development, and commercial banks play a core role as the main force of implementing green credit policy. Based on the data of 10 commercial banks with relatively early and complete disclosure of green credit scale from 2016 to 2020, this paper establishes the operating performance evaluation system of commercial banks by using the principal component analysis(PCA)method, and establishes a fixed-effect model to empirically analyze the impact of green credit scale on the operating performance of commercial banks. The results show that there is a significant positive correlation between the scale of green credit and the operating performance of commercial banks. The implementation of green credit policy will improve the operating performance of commercial banks, and the promoting role of state-owned commercial banks is more prominent than that of small and medium-sized joint-stock commercial banks.

Research on the Problems and Countermeasures of the Financial Services of Small and Medium Commercial Banks

Research on the Problems and Countermeasures of the Financial Services of Small and Medium Commercial Banks

Financial Ethics and Performance of Kenyan Small and Medium Commercial Banks

Purpose: Past empirical investigations on financial ethics have failed to provide an empirical analysis of the primary unethical banking practices prevalent in Kenya’s banking industry, or the perceptions of banking professionals on the type of concerns they believe might be influencing their resolution making. This study aimed at investigating the impact of ethical financial practices on the financial performance of small and medium banks in Kenya. The specific objectives of this research were to; analyse the effect of insider abuse and to investigate the effect of predatory lending on financial performance of small and medium sized commercial banks in Kenya.
 Methodology: The research was informed by the Ethical Egoism Theory which predisposes that people should entirely act in their self- interest. The study involved 124 heads of key functional units of the 33 small and medium banks in Kenya that were operational at the time of the study. From the target population of 124 bank managers, a proportionate stratified sample of 94 bank managers was selected for the study using Cochran and Snedecor (1989). Utilizing both primary data, the study applied a semi-structured questionnaire as the main research instrument. Both descriptive and inferential statistics were used for data analysis using the 23rd version of SPSS. From the analyses, the independent variables (predatory lending and insider dealings) moderately influenced the dependent variable (ROA and ROE) with an adjusted R2 = 0.025.
 Findings: From the findings, the Multiple Determination Coefficient (R2) was 0.056 meaning that linear regression of “Low fit goodness” explains only 5.6% of the variation in the economic performance of the small and medium banks in Kenya. To establish the cumulative effect of the variables of prediction on the dependent variable, the Analysis of Variance (ANOVA) was applied to determine and analyse the effects of interaction. The study concluded that, a number of insider dealings and predatory banking practices still prevail among the small and medium Kenyan banks despite the ongoing reforms in the banking sector.
 Recommendations: The study recommends that commercial banks and other financial institutions in Kenya invest more in establishing systems that promote financial ethics in their service delivery to build their core competency in the dynamic market. At policy level, this study proposes that the Central Bank of Kenya, the Treasury and, other line agencies fast-track the fiscal reform agenda with regards to prudential banking and financial service delivery to mitigate the influence of systemic supervisory weaknesses.

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.

Are European commercial banks more profitable than cooperative banks? Evidence from a low interest rate environment

AbstractOur aim is to compare empirically the profitability of European cooperative and commercial banks in a low interest rate environment. We employ dynamic panel data methods on a data set of nearly 1000 banks from 11 European countries where both ownership structures compete on the same market. We observed different banking strategies during the 2009–2015 period, when market interest rates reached an all‐time low. Our analysis produced four main conclusions. First, we find that commercial banks maintain superior profitability over cooperative banks in an environment of low interest rates. Second, commercial banks unjustifiably decreased their loan loss provisioning in a low interest rate environment in order to maintain their profitability. This trend is not present in cooperative banks. Third, decreased provisioning is present mainly in smaller institutions. Fourth, cooperative banks are significantly more stable than commercial banks in terms of their Z‐score in a low interest rate environment. This finding is in line with existing findings during normal interest rates. In addition, the Z‐score of cooperative banks increased during the observation period, whereas the Z‐score of commercial banks remained stable. Our findings survive a battery of robustness checks. Our results also show differences in the strategies and priorities of both competing ownership types in a low interest rate environment: commercial banks focus on maintaining their profitability by decreasing loan loss provisions, whereas cooperative banks seek to increase their stability. Therefore, regulators pursuing stability in a low interest rate environment should focus on the credit risk management of small 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.

Forecasting charge-off rates with a panel Tobit model: the role of uncertainty

ABSTRACT Based on a large panel dataset of small commercial banks in the United States, this paper employs a dynamic panel Tobit model to analyse the role of uncertainty in forecasting charge-off rates on loans for credit card (CC) and residential real estate (RRE). When compared to other standard predictors, such as house prices and unemployment rates, we find that the effect of uncertainty changes on charge-off rates is more pronounced. Furthermore, it is evident that including heteroscedasticity in the model specification leads to more accurate forecasts.

Research on the Characteristics and Development Trends of Direct Bank Operation Mode of Small and Medium Commercial Banks

Direct banking is a development model for commercial banks to respond to the impact of various financial platforms in the development of the Internet, and it is showing emerging vitality in my country. However, the current development of domestic direct selling banks has problems such as relatively single business operations and serious product homogeneity[1]. Direct selling banks are still a part of traditional commercial banks, lacking independence, precise positioning and lack of distinctive services; in order to find more suitable domestic. The operation model of direct selling bank development reduces the development gap with foreign direct selling banks and expands the customer base. This article understands the future development trend of direct selling banks and can make relevant response policies.