Research on the Impact of Commercial Banks' Digitalization Level on Their Operational Performance

Chenxin Zhao

doi:10.6911/WSRJ.202410_10(10).0007

Authors

Chenxin Zhao

DOI:

https://doi.org/10.6911/WSRJ.202410_10(10).0007

Keywords:

Commercial Bank, Digital Transformation, Business Performance.

Abstract

This article takes the digitalization level of commercial banks as the research object to explore the impact of the improvement of commercial banks' digitalization level on their operational performance. The article uses the "Peking University Commercial Bank Digital Transformation Index" from the Digital Finance Research Center of Peking University, selecting banks that have publicly available annual reports for at least three years from 2010 to 2021. Based on theoretical analysis, in order to test the non-linear impact of commercial banks' digital transformation on operational performance, a multivariate regression benchmark model is designed using the unbalanced panel data of sample banks and the ordinary least squares (OLS) estimation method. The study finds that: the impact of the improvement of commercial banks' digitalization level (internal financial technology) on bank performance shows a "U-shaped" effect that first suppresses and then promotes. The "U-shaped" effect of first suppression and then promotion is more significant for non-listed banks, banks with lower registered digital financial development, and banks with lower financial technology development levels compared to listed banks, banks with higher registered digital financial development, and banks with higher financial technology development levels.

Downloads

Download data is not yet available.

References

[1] David, A., 1990, “The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox”, American Economic Review, Vol.80 (2), pp.355~361.

[2] Xie Zhichun, Zhao Xinglu, Liu Yuan. The Development of Financial Technology and the Digital Strategic Transformation of Commercial Banks [J]. China Soft Science, 2018, (08): 184-192.

[3] Qiu Han, Huang Yiping, Ji Yang. The Impact of Fintech on Traditional Banking Behavior: A Perspective Based on Internet Financial Management [J]. Financial Research, 2018 (11): 17-29.

[4] Fuster, A., Plosser, M., Schnabl, P. and Vickery, J., 2019, “The Role of Technology in Mortgage Lending”, Review of Financial Studies, Vol.32 (5), pp.1854~1899.

[5] Berg, T., Burg, V., Gombović, A. and Puri, M., 2020, “On the Rise of Fintechs：Credit Scoring Using Digital Footprints”, Review of Financial Studies, Vol.33 (7), pp.2845~2897.

[6] Cheng, M. and Qu, Y., 2020, “Does Bank FinTech Reduce Credit Risk？Evidence from China”, Pacific-Basin Finance Journal, Vol.63, pp.101398.

[7] Tang, H., 2019, “Peer-to-peer Lenders Versus Banks：Substitutes or Complements？”, Review of Financial Studies, Vol.32 (5), pp.1900~1938.

[8] Thakor, A., 2020, “FinTech and Banking: What Do We Know？”, Journal of Financial Intermediation, Vol.41, pp.100833.

[9] Wang Xiaohua, Deng Xiaowen, Zhou Haiyang. The Impact of Fintech on the Operational Performance of Commercial Banks: A Boost or a Hindrance? [J]. Reform, 2022, (08): 141-155.

[10] Xiong Jian, Zhang Ye, Dong Xiaolin. The Impact of Fintech on the Operational Performance of Commercial Banks: Crowding-out Effect or Technological Spillover Effect? [J]. Economic Review, 2021 (3): 89-104.

[11] Zhang Qingjun, Wang Jie. The Impact of Digital Transformation on the Performance of Commercial Banks: Evidence from A-Share Listed Commercial Banks [J]. Fujian Finance, 2022, (12): 37-45.

[12] Li Jianjun, Jiang Shichao. The Impact of Financial Technology on the Commercial Sustainability of Inclusive Finance: Micro Evidence of Financial Enhancement Effect [J]. China Economic Quarterly, 2021, 21(3): 889-908.

[13] Huang Yunchuan. Research on the Impact of the Digital Transformation of Inclusive Finance Business of Rural Credit Cooperatives in Beichuan County on Its Operational Performance [D]. Southwest University of Finance and Economics, 2019. DOI: 10.27412/d.cnki.gxncu.2019.000053.

[14] He Xiaogang, Luo Xin, He Yang. Digital Revolution and Bank Performance: In Name Only or A Force Multiplier [J]. Industrial Organization Review, 2022, 16(04): 46-72.

[15] Zhang Jinqing, Li Kelei, Zhang Jianyu: "How Does Bank Fintech Affect Corporate Structural Deleveraging?", Financial Research, 2021, Issue 9.

[16] Xie Xuanli, Wang Shihui. The Impact of Digital Transformation on the Performance of Chinese Commercial Banks: Measurement, Process, and Influence [J]. China EconoCai Weixing. Relaxation of Market Access for Branches, Inter-regional Operations, and Bank Performance [J]. Financial Research, 2016 (6): 127-141.

[17] Cai Weixing. Relaxation of Market Access for Branches, Inter-regional Operations, and Bank Performance [J]. Financial Research, 2016 (6): 127-141.

[18] Liu Jiasong, Zhang Bo, Luo Qi. Foreign Equity Participation, Board Characteristics, and the Operational Performance of Commercial Banks: An Empirical Analysis of 121 Commercial Banks in China [J]. Chinese Journal of Management Science, 2019, 27(9): 119-129.