The Impact of Non-Interest Business Development on the Performance of Chinese Rural Commercial Banks

Yueshu Zhou, Yuanyuan Peng and Rashid Latief

Emerging Markets Finance and Trade, 2021, vol. 57, issue 7, 1859-1877

Abstract: Since being restructured, Chinese rural commercial banks (RCBs) have had two goals: supporting the agricultural sector and sustainable development. This paper aims to analyze the effect of non-interest business development on the performance of RCBs. Our sample consists of 107 RCBs in eight provinces in eastern China. The results of the study demonstrated a U-shaped relationship between non-interest income and the performance of RCBs. The main reason is that at different stages of business development, non-interest business other than fees and commissions has achieved economies of scale. Further analysis found the existence of threshold effects on the performance of RCBs from the development non-interest business. When the cost ratio of non-interest business is higher than 0.2213, non-interest business development has a significant effect on the performance of RCBs.

Date: 2021
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DOI: 10.1080/1540496X.2019.1711369

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