The Determinants Of Bank Performance In China
Bank Performance In China Dissertation – The purpose of this dissertation is to examine the determinants of performance for four different types of Chinese banks from 1999-2006, and to assess which of four measures describes performance best. The independent variables include the standard financial ratios. It also quantifies influences from listing, the type of bank, the extent of foreign ownership, bank reforms and macroeconomic variables.
The results suggest economic value added and the net interest margin do better than the more traditional measures of profitability, namely ROAE and ROAA. The type of bank is influential but bank size is not. While listing improves performance, neither the percentage of foreign ownership nor bank reforms has any discernible effect. Some macroeconomic variables and financial ratios are significant with the expected signs.
Since 1978, the Chinese economy has been the subject of well-documented economic reforms, designed to improve economic efficiency and resource allocation. Though slower to commence in the banking sector, the pace has picked up after the Chinese authorities came under pressure to meet their WTO (2001) agreement to allow foreign bank participation by 2007.
Since December 2003, the China Regulatory Commission has allowed foreign banks to own up to 25% of a Chinese financial institution but if their equity participation exceeds 25%, they are designated foreign joint-venture banks. At the end of 2006, there were six wholly owned foreign and five joint venture banks. Recently, foreigners were allowed to buy shares in three of the four big state-owned banks that were “privatized” though the government continues to hold a controlling interest. In addition foreign firms have purchased minority stakes in national and regional/city commercial banks. By allowing foreign bank entry, the Chinese government hopes to improve bank performance in addition to meeting WTO conditions.
China’s banking reform can be divided into three stages. The first stage (1979-1993) began with the creation of a two-tier banking system, when four specialized banks were established. Though state-owned, they were separated from the direct control of the central bank and Ministry of Finance. During stage two (1994-2003), they were converted into state-owned commercial banks. The partial sale of shares in three of these banks marked the beginning of stage three (2004-present) effectively making them joint stock banks.
- 10,000 words – 30 pages in length
- Excellent use of literature
- Good in depth analysis
- Well written throughout
- Excellent use of economic models
- Ideal for business economics students
2 Economic Value Added as a Measure of Performance
3 Methodology and Dataset
Economic Value Added
4 Analysis of Empirical Results
Mean Difference t-Tests on Performance Measures
Determinants of Bank Performance