The Effects of the Sharing Economy: How Does Internet Finance Influence Commercial Bank Risk Preferences?

ABSTRACT

In this article, we provide an evidence on the effects of the sharing economy by studying internet finance. It aims to explore how internet finance affects the relationship between commercial bank risk preferences and monetary policy, and discusses whether this impact varies across heterogeneous banks. The results suggest that having a loose monetary policy encourages a preference for risk. In addition, internet finance alters the sensitivity of bank risk behavior to monetary policy. Internet finance has a heterogeneous influence, depending on a bank’s ownership (i.e., state or private) and size. At privately owned banks, internet finance has only a moderate impact on the bank risk-taking transmission channel of monetary policy, unlike the subsample of large banks.

KEY WORDS:

• bank risk preferences
• internet finance
• monetary policy
• sharing economy

JEL CLASSIFICATION:

• E52
• G21
• G32

Acknowledgments

Financial support from Key Project of National Social Science Fund [grant no.14AGL016] is gratefully acknowledged. The authors thank the comments and suggestions provided by the referees, which helped to improve the article.

Notes

^1. http://www.simulation.investopedia.com.

^2. http://www.ecns.cn/business/2017/03-05/247970.shtml.

^3. The x-axis measures seasonal data of the internet finance development index and third-party payment ratio in China from 2010 to 2016. However, we list only the first quarter of every year on the x-axis, such as 2010Q1, for simplicity.

Additional information

Funding

This work was supported by National Social Science Foundation of China [14AGL016].