Economics at your fingertips  

Risk and return of online channel adoption in the banking industry

Dongwei He, Chun-Yu Ho () and Li Xu

Pacific-Basin Finance Journal, 2020, vol. 60, issue C

Abstract: Online banking has become an important distribution channel for commercial banks. We construct a bank-specific indicator of online channel adoption to study the risk and return of online channel based on a sample of 118 Chinese banks over the period of 2002–2016. Our empirical results find that online channel improves profit efficiency (i.e. a positive return) of the adopting banks. Even though cost efficiency deteriorates, such improvement attributes to the rise in non-interest income efficiency. In reference to risk management, online channel weakens loan quality of the adopting banks, which also raises their solvency risk accordingly. Overall, our results suggest that online channel increases the return of adoption banks albeit at a higher risk. Such risk-return effects are heterogeneous depending on the management skill, labor intensity and size of adopting banks. However, there is no significant return relates to the costly content enrichment of online channel. Finally, our results are robust to alternative specifications, alternative measures of bank efficiency and risk, alternative sample selection and estimation methods, and omitted variable biases.

Keywords: Information technology; Multi-channel retailing; Efficiency; Risk; China (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.pacfin.2020.101268

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-10-23
Handle: RePEc:eee:pacfin:v:60:y:2020:i:c:s0927538x19304858