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The effects of business models on bank risk before, during and after financial crisis: evidence from China

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  • Maoyong Cheng
  • Caoyuan Ma
  • Hongyan Geng

Abstract

Using Chinese data from 2004 to 2016, we investigate the effects of business models on bank risk before, during and after financial crisis. Three main results emerge. First, insolvency risk and ROA volatility significantly increase if banks increase their share of non-interest income, and this relationship mainly appears during and after financial crisis. Second, a higher non-deposit funding share results in lower capital risk and credit risk and higher asset quality. However, these effects disappear after financial crisis. Finally, further analyses show that the effects of non-interest income on bank risk are mainly from assets-based non-interest income, and the effects of non-deposit funding on bank risk come primarily from money-market and short-term funding.

Suggested Citation

  • Maoyong Cheng & Caoyuan Ma & Hongyan Geng, 2020. "The effects of business models on bank risk before, during and after financial crisis: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 52(20), pages 2147-2164, April.
    • Handle: RePEc:taf:applec:v:52:y:2020:i:20:p:2147-2164
    DOI: 10.1080/00036846.2019.1683148
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    Cited by:

    1. Cheng, Maoyong & Zhao, Hong & Zhou, Mingming, 2020. "Foreign Strategic Investors, State Ownership, and Non-interest Activities: Evidence from China," Journal of Financial Stability, Elsevier, vol. 50(C).
    2. Geng, Hongyan & Guo, Pin & Cheng, Maoyong, 2023. "The dark side of bank FinTech: Evidence from a transition economy," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1811-1830.
    3. Williams, Barry & Rajaguru, Gulasekaran, 2022. "The evolution of bank revenue and risk in the Asia-Pacific Region," Pacific-Basin Finance Journal, Elsevier, vol. 71(C).

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