An Econometric Model of Interest Rate Marketization and Diversification Driving the Performance Improvement of Listed Commercial Banks in China

Abstract

Commercial banks play a crucial role in China's financial markets, and their stability and health are particularly important for the market and national economic development. The study collected a total of 225 balanced panel data sets from 2015 to 2021 as empirical samples, employing both qualitative and quantitative analysis methods. Focusing on the perspective of diversified operations, the study utilized a econometric model based on panel regression to thoroughly examine the relationship between interest rate liberalization and bank operational performance, as well as the moderating effect of diversified operations. The empirical findings indicate that there is a negative relationship between commercial bank performance and the degree of interest rate liberalization, and that diversified operations mitigate this negative impact. Based on these findings, policy recommendations can be proposed from both the bank and government perspectives to improve the quality of diversified operations.