Internet finance and bank risk-taking: evidence from the Chinese banking sector

Nov. 22,2019
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This paper studies the relationship between Internet finance and bank risk-taking with annual panel data from 107 Chinese banks from 2007 to 2016. The results indicate the following findings. Internet finance has a marginally increasing single-threshold effect on bank risk-taking, and bank risk-taking becomes more sensitive to Internet finance shocks as the bank capital adequacy ratio increases. The specific functions of Internet finance differ in terms of the impacts on bank risk-taking. The information processing function of Internet finance has the greatest impact on bank risk-taking, followed by the resource allocation function and then the function of payment and clearing, while the impact of the risk management function and that of the resource allocation function do not show significant difference. Moreover, different types of monetary policies also vary greatly in terms of the control and regulation of bank risk-taking. In the case of tight monetary policies, quantity-based instruments have a promoting effect on bank risk-taking while price-based instruments have an inhibitory effect, with the former stronger than the latter. In addition, bank risk-taking has significant procyclicality, which makes it more likely to be driven by economic growth when the payment and clearing function of Internet finance dominates, and more likely to be influenced by monetary policies when the resource allocation function of Internet finance dominates.

Corresponding Author: GU Haifeng
CNKI Press Officer: ZHONG Ming

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