The Online Channel, Trading Behavior, and Customer Performance in Financial Services: Evidence from China

Posted: 27 Oct 2016 Last revised: 23 Jan 2017

See all articles by Yang Pan

Yang Pan

University of Maryland

Sunil Mithas

University of Maryland - Robert H. Smith School of Business

J. J. Hsieh

Georgia State University - Department of Computer Information Systems

Che-Wei Liu

Indiana University Bloomington - Kelley School of Business

Date Written: October 25, 2016

Abstract

Although many securities firms are using the Internet to facilitate stock transactions, little is known about whether and how the use of the online channel affects customer performance and, more importantly, how risk preferences moderate the effect on performance. This research investigates online channel usage and customer performance using a unique data set of more than 7000 customer accounts over a 44-month period (2010-2013) at a large Chinese securities firm. The findings reveal that online channel usage is associated with higher performance in customers’ portfolio returns. However, these effects differ across risk preference categories; specifically, risk-averse investors earn higher profits than risk-neutral investors from using the online channel. Further analyses indicate that the higher performance for risk-averse investors can be explained by their higher trading frequency, but lower level of average trading volume per transaction compared to risk-neutral investors. In contrast, risk-seeking investors profit less from online channel usage because of their higher level of both trading frequency and average trading volume per transaction. We discuss the implications for research and practice.

Keywords: online channel, risk preference, emerging market

Suggested Citation

Pan, Yang and Mithas, Sunil and Hsieh, J. J. and Liu, Che-Wei, The Online Channel, Trading Behavior, and Customer Performance in Financial Services: Evidence from China (October 25, 2016). Robert H. Smith School Research Paper No. RHS 2858957. Available at SSRN: https://ssrn.com/abstract=2858957

Yang Pan (Contact Author)

University of Maryland ( email )

Business Education Complex
2208
Baton Rouge, LA 70803
United States

Sunil Mithas

University of Maryland - Robert H. Smith School of Business ( email )

​Van Munching Hall
7699 Mowatt Ln
College Park, MD 20742-1815
United States

HOME PAGE: http://sunilmithas.com/

J. J. Hsieh

Georgia State University - Department of Computer Information Systems ( email )

Atlanta, GA 30302
United States

Che-Wei Liu

Indiana University Bloomington - Kelley School of Business ( email )

1309 E 10th Street, Hodge Hall 4100
Bloomington, IN 47405
United States

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