Empirical Research On Trust Business Efficiencies And Their Influential Factors Of China’s Trust Companies

China’s trust asset has been growing rapidly in recent years,by the end of June2014it’s scale had been reached12.48trillion yuan,second only to bank financing fund scale.Trust business is trust company’s proprietary and origin business, whihch is the primarysource of trust company’s profit. At present,China’s trust business faces the challenges ofreform and competition,and has many issues to be resolved,so it is necessary to improvethe efficiency of trust business. However, due to the late development, there have beenfew literature which studies on efficiency of trust business as a functional unit of trustcompany by now, not to mention the quantitative study. Against this background, thispaper attempts to build measurement models to measure every trust company’s efficiencylevels of trust business, research on factors affecting the trust business efficiencies bytheoretical analysis and quantitative analysis, and discusse trust business risks and theirtransmission mechanism. Based on the measurement results and macro environment, thepaths to optimize the efficiency of the trust business are found.After Identifying research purposes, this paper reviews the relevant literature andcompares various research methods, then proposed this paper’s measurement researchmethods: the efficiency measurement based on unbalanced panel data and stochasticfrontier analysis (SFA) and factor analysis based on multiple regression model.The Innovation points: first, it is innovative to investigate efficiency of trust businessas a functional unit of trust company; second, it is innovative to build efficiencymeasurement model which use some new indicators by SFA and TL; third, it isinnovative to sort out the risks of various types of trust business and research risktransmission mechanism；fourth, it is innovative to propose routes to optimize theefficiency of trust business based on the quantitative study and macroeconomicenvironment.Chapter Two introduces the theoretical system of efficiency and measurementmodels. According to the time development, efficiency theory has been experienced threestages: classical economics, neoclassical economics and X efficiency. There arenon-parametric analysis and parameter estimation method to conduct efficiencymeasurement. After comparing every methods and considerring the special nature of trustbusiness in China, SFA is best meetting the purpose of this study. Chapter Three builds efficiency measurement model based on SFA and TL usingunbalanced panel data in year2004-2013, and then measures out two efficiencies:revenue efficiency of trust business and scale efficiency of trust business. The advantagesof the model are the comprehensive data collection and the use of new variables.Next, each of these two kinds of efficiency estimation results is analysedmeticulously, some meaningful discoveries are found: the companies with high revenueefficiencies not always have high scale efficiencies, the companies with low revenueefficiencies not always have low scale efficiencies; industry leading companies havestrong business expansion ability but their profitability is not high; good market andcompetitive environment make the efficiencies of trust business improved gradually; thedevelopment of trust business conforms to the macro and industry policies but the growthrate of efficiency is gradually reduced; the gaps of scale efficiencies between companieshave been narrowing but big differences in profitability between companies are existed;trust business efficiency levels are constrainted by the levels of regional economicdevelopment; the nature of controlling shareholder has big influence to the efficiency oftrust business. These discoveries can be reasonably explained based on MarketSegmentation Theory, Scale Economies Effect Theory, Invisible Hand Theory,Institutional Economics Theory, Comparative Advantage Theory, Regional EconomicTheory and Multiple Strategies Theory.Chapter Four analysis influential factors of efficiencies from the qualitative andquantitative aspects separately. Chapter Three firstly does theoretical analysis to theinfluential factors of trust business efficiencies from macro, industrial, company internaland regional aspects. Secondly constructes factor analysis models for the revenueefficiency of trust business and the scale efficiency of trust business separately usingmultiple regression method and unbalanced panel data in year2004-2013, the efficiencyvalues of the two types, which were measured out in Chapter Three, are as the dependentvariables, the proportion of trust loans, proportion of collective trust, trust businessmarket share, proportion of trust business expense, proportion of highly educatedemployees, GDP per person of every Provinces and Municipality are as independentvariables. The advantages of the model are the comprehensive data collection andvariables choice.Next we interpretate the measurement results of the two models meticulously, somemeaningful discoveries are found: the efficiency of trust business is not affected by theoperation mode of trust fund; trust business shows scale effect in recent years; thecontribution of highly educated employees to trust business efficiency is lower thanbefore; trust business efficiency has been gradually breaking the limitations of local economic development; collective trust helps to improve the efficiencies of trust business.These discoveries can be reasonably explained based on Cooperative Game Theory, ScaleEconomies Effect Theory, X-Effect Theory, Regional Economic Theory andPrincipal-agent Theory.Chapter Five discusses trust business risks and their transmission mechanism.Trust business is for operating risks,so risk factors inevitably affect the efficiency of trustbusiness. However, due to data availability issues, risk factors were not included in themeasurement model of Chapter Four. Considering it’s importance, Chapter Five studiesthe risk of trust business exclusively. First, we summary the general risks of trustbusiness, and then discuss typical risk factors and preventive measures for five types oftrust business: bank-trust cooperation, government-trust cooperation, real estate trust,mineral trust and artwork trust. Considering trust business is connecting real economyand financial markets, risk is inevitable mutual infected, so we also study on trustbusiness’ risk transmission mechanism: real economic risk is transmitted to the trustbusiness by private lending crisis, local government financing platform debt default andreal estate market risk; trust business risk is transmitted to the entire financial system bysadow banking and rputation cisis. These discusion is for carifing why risk is diffusedand how to block risk diffusion.Chapter Six bases on the above study and macroeconomic environment, proposesroutes to optimize the efficiency of trust business: First, in terms of risk management andcontrol, build a comprehensive and detailed risk control system; second, in terms ofbusiness development, maintain business development in line with the times, fosterself-management competitive advantage, layout non-money wealth management market,build complementary advantages partnership; in terms of institution-building, buildefficient and high-quality team, constructe the independent and high-end marketingsystem.Chapter Seven summarizes this paper’s important conclusions and discusses thefuture direction of related academic research.