Research on the Regional Impact of Digital Inclusive Finance Development on the Profitability of Commercial Banks

Shuolei Wu () and Xinrui Ma ()
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Shuolei Wu: Tianjin University of Science and Technology
Xinrui Ma: Tianjin University of Science and Technology

A chapter in Proceedings of the 2025 3rd International Academic Conference on Management Innovation and Economic Development (MIED 2025), 2025, pp 820-831 from Springer

Abstract: Abstract Based on panel data from 42 listed commercial banks in China from 2011 to 2023, this paper empirically analyzes the impact of digital finance on the profitability of commercial banks using a two-way fixed effects model. With return on total assets (ROA) as the explained variable, the digital inclusive finance index as the core explanatory variable, and controlling for factors such as capital adequacy ratio, bank size, loan-to-deposit ratio and non-performing loan ratio. The study found that the development of digital finance has a significant negative impact on the profitability of commercial banks. For every 1-unit increase in the digital inclusive finance index, ROA drops by approximately 0.17 percent, and this effect is particularly significant in public banks and the eastern region. The capital adequacy ratio and the loan-to-deposit ratio have a positive effect on profitability, while the non-performing loan ratio significantly suppresses profitability. Heterogeneity analysis shows that state-owned banks are less sensitive to digital financial shocks, while the impact in the central and western regions fails to pass the significance test due to insufficient penetration of inclusive finance. The robustness test verified the reliability of the conclusion by replacing the explained variable (ROE) with the lag model. Based on this, it is recommended that commercial banks deepen digital transformation to optimize operational efficiency, improve capital replenishment and risk management mechanisms, and adopt differentiated strategies to address the challenges of regional and attribute heterogeneity.

Keywords: Digital finance; Profitability of commercial banks; Digital inclusive finance index; Fixed-effect model; Heterogeneity analysis (search for similar items in EconPapers)
Date: 2025
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DOI: 10.2991/978-94-6463-835-6_86

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