Competition and Profitability of Commercial Banks

DOI

10.2991/978-94-6463-992-6_13How to use a DOI?

Keywords

Profitability; Competition; Commercial Banks

Abstract

Nowadays, banking industry has encountered a tremendous competition from other financial institutions. Institutions such as securities and insurance companies, as well as emerging fintech companies, are constantly emerging and engaging in fierce competition with commercial banks, affecting the profitability of commercial banks. At the same time, the process of interest rate liberalization is accelerating, which has impacted the traditional profit model of banks relying on the spread between deposits and loans. Consequently, commercial banks have to renew operation ideology to improve their competition capability and hence increase their profit.

There is little in-depth academic research on the influence of commercial banks’ competition on their profitability. This paper, based on literature review, conducts a clear discussion and theoretical analysis about the influence mechanism of commercial banks’ competition. Furthermore, this paper puts forward to the academic hypothesis that competition of commercial banks would exert a negative influence on their profitability. This paper then collects data from the database of WIND and gets the specific relevant data ranging from 2011 to 2023. This paper then builds a fixed-effect model and conducts regression analysis. Besides, this paper conducts robustness test and endogeneity test and concludes that commercial banks’ competition would indeed exert a negative influence on their profitability and the influence is robust. In addition, this paper also finds that the influence on profitability would vary for commercials banks with different asset liability ratio and non-performing loan ratio.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Yichi Zhang
AU  - Yanfei Shu
PY  - 2026
DA  - 2026/02/20
TI  - Competition and Profitability of Commercial Banks
BT  - Proceedings of the 2025 4th International Conference on Mathematical Statistics and Economic Analysis (MSEA 2025)
PB  - Atlantis Press
SP  - 119
EP  - 128
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-992-6_13
DO  - 10.2991/978-94-6463-992-6_13
ID  - Zhang2026
ER  -