How does competition for funds in the wealth management market impact Chinese households’ risky financial investment?

ABSTRACT

This paper analyzes the relationship between the competition for funds in the wealth management market and Chinese households’ risky financial investment. Through mechanism analysis, we find that the competition for funds in the wealth management market reduces Chinese households’ risky financial investment by increasing the interest rate of financial products and making break-even commitments. Further analysis suggests that medium and high solvency households have more expectations for break-even and are more affected by the competition for funds in the wealth management market.

KEYWORDS:

• Households’ investment choice
• internet finance
• financial risk
• competition for funds
• wealth management products

JEL CLASSIFICATION:

• D14
• D81
• O16

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ The household’s solvency is calculated by $\frac{Incom{e}_{y,j}+LiquidAsset{s}_{y,j}}{Expens{e}_{y,j}}$, that is, the sum of residents’ income and liquid assets divided by all expenses, which means the number of years the household can maintain its current living standards, and liquid asset is the sum of the household’s cash and savings. In this paper, households are equally divided into three groups: low, medium, and high solvency levels.

Additional information

Funding

This work was supported by the ‘the Fundamental Research Funds for the Central Universities’ in UIBE of China [CXTD9-05]; the National Social Science Fund of China [17AJY027].