Study On The Determinant Of Credit Decision-making And Performance Of Commercial Banks

In the information asymmetry market, credit decision-making is a means to control thecredit risk of commercial banks, as well as a core business for commercial banks to manageassets, enhance performance and sustain a competitive position. Hence, the study on thecredit decision-making and performance has become one of the hot issues for both marketingpractitioners and scholars.Based on the New Institutional Economics, Law and Finance and the incompletecontract theory, this dissertation explores how the institutional environment in Chineseemerging and transitional economies influence the credit decision. Creidit decision-making isnot only constrained by asymmetric information and uncertain factors of financingcompanies, but also bounded by regulatory characteristics in emerging and transitionaleconomies. Therefore, studying the credit decision-making should base on institutionalbackground.The main ideas and opinions raised in this dissertation are listed as follows:Firstly, the mechanism of the institutional environment influencing on the creditdecision-making and bank performance is studied by using theoretical models andcomparative static analysis. This dissertation deduces the second best loan contractsbetween bank and financing companies in the information asymmetry market. It mainlydiscusses that the credit approval, lending rates and performance are influenced by theimplementation of the nominal income right and the mortgage right and the efficiency of lawenforcement. Theoretical results show that credit rationing is an equilibrium phenomenon dueto the presence of asymmetric information between commercial bank and financingcompanies. In a worsening credit environment, obtaining loans gets more difficult forenterprises and credit rationing phenomenon gets more serious. With improving the creditenvironment and raising the lending rates, bank performance is enhanced.Secondly, this dissertation, based on the micro survey data of commercial banks inChina, using Probit model, Logit model, Heckman two-step and other methods, studies thefactors influencing the credit decision-making. Empirical research shows that:(1) Industrialpolicy guides the credit approval and the lending rate pricing. The key supportive firmsalways get bank loan more easily than the general supportive firms or the restrictive firms, aswell as enjoy more preferential lending rates.(2) There is no ownership discrimination in thecredit decision-making of commercial banks.(3) Asset scale affects both the credit approvaland the lending rate pricing.Thirdly, according to credit data of Chinese listed commercial banks, this dissertationresearches the impact on bank performance by using panel data model. It tests if the bank performance is influenced by the degree of regional marketization, the degree of financialmarketization, the efficiency of law enforcement or monetary policy. Empirical researchshows that:(1) the main factors affecting the bank performance includes internal and externalgovernance structure variables,(2) the degree of regional marketization does not have asignificant effect on bank performance, but the financial liberalization index and theefficiency of law enforcement have some remarkable positive influence, and (3) interest rateshas a positive impact on bank performance.