Empirical Analysis of the Influence of Interest Income on the Operational Efficiency of Commercial Banks

Taiyue Chen ()
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Taiyue Chen: Central University of Finance and Economics

A chapter in Proceedings of the 2023 International Conference on Management Innovation and Economy Development (MIED 2023), 2024, pp 447-457 from Springer

Abstract: Abstract With China's interest rate liberalisation reform, the interest margin between deposits and loans in the banking industry has narrowed significantly. In order to maintain market competitiveness, more and more commercial banks are starting to reduce their dependence on traditional interest income business. However, there has been no research on whether Interest income is no longer important to the business performance of commercial banks and whether the impact of interest income on the business performance of commercial banks has changed. Therefore, this paper collects data on Interest Income Ratio, Asset-liability Ratio, Non-performing Loan Ratio, Total Asset Turnover and Per Capita Profit of 42 listed banks from 2010 to 2020 from WIND and CSMAR databases (some missing data are supplemented by bank statements, and variables are also reduced at 5% level to ensure data validity). Construct a fixed effects regression model. In addition, two stage least square method is used to test the endogeneity of the model. The robustness of the model is tested by changing the sample observations, performing Winsor analysis and processing on interest income, and replacing interest income with non-interest income/total assets. Finally, the following conclusions are drawn: (1) interest income has a negative inhibitory effect on efficiency; (2) the effect of interest income on efficiency is significantly heterogeneous.

Keywords: Efficiency of Bank Operation; Interest Income; Commercial Bank (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-260-6_57

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DOI: 10.2991/978-94-6463-260-6_57

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