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Impact of internet finance on the performance of commercial banks in China

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  • Dong, Jichang
  • Yin, Lijun
  • Liu, Xiaoting
  • Hu, Meiting
  • Li, Xiuting
  • Liu, Lei

Abstract

The rapid development of Internet finance has certainly affected the operation of commercial banks. This paper investigates the impact of Internet finance on commercial banks. First, a theoretical influence mechanism of Internet finance on commercial banks is explored, and the Internet finance index and integrated performance index of commercial banks are constructed using factor analysis. Then, a static panel and a dynamic panel model are established to empirically examine the impact of Internet finance on the profitability, security, liquidity and growth as well as the comprehensive business performance of commercial banks. Finally, the heterogenous impacts of Internet finance on city commercial banks, joint-stock banks and state-owned commercial banks are discussed. The results show that the development of Internet finance has a positive impact on the profitability, security and growth of commercial banks, and has a negative impact on the liquidity of commercial banks. In addition, Internet finance has promoted the improvement of the comprehensive business performance of commercial banks. Moreover, the impact of Internet finance on different types of commercial banks is heterogeneous with the impact on state-owned commercial banks being the weakest and the impact on city commercial banks is the most significant.

Suggested Citation

  • Dong, Jichang & Yin, Lijun & Liu, Xiaoting & Hu, Meiting & Li, Xiuting & Liu, Lei, 2020. "Impact of internet finance on the performance of commercial banks in China," International Review of Financial Analysis, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:finana:v:72:y:2020:i:c:s1057521920302234
    DOI: 10.1016/j.irfa.2020.101579
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    More about this item

    Keywords

    Internet finance; Commercial banks; Performance; GMM; Heterogeneity;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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