The Study On Expansion And Diversitication Of Chinese City Bank

Along with financial reform and financial liberalization, China’s city commercial banks achieved remarkable growth rapid. The background and establishment has a similar way in China’s city commercial banks, but with ten years of development, the development of different city commercial banks appears significant differences. Wether their expansion to improve business performance and management capabilities can be achieved, become the focus of public attention. From the point of expansion, diversification, especially business diversification and geographic diversification has become important means of city commercial expansion, both of which behave lead to some controversy. In this paper, by diversified perspective, we use theoretical analysis and empirical analysis methods to study the expansion of city commercial banks and discuss the performance of different diversification forms. Finally, by the conclusions, we propose appropriate policy recommendations.First, we examine the effect of China’s city commercial banks expansion from the perspective of the economies of scale. By the result economies of scale, China’s city commercial banks is in the range of economies of scale as a whole, they can reduce average costs and improve business performance through expansion. However, some of the larger banks go beyond the economies of scale, they can not obtain additional revenue through expansion. In addition, from the perspective of operational efficiency, our article test wether the city commercial banks scale expansion can improve their management capacity. The results show that there is no management capacity improvement from expansion, but there are several types of special expansion exhibit different effects, the operating efficiency of listed banks has been significantly higher than other city commercial banks, and banks go through assets reorganization show the worst operating efficiency.Second, cross-regional operation, as geographic diversification, is an important means of expansion of city commercial banks, because the existence of barriers to entry regulators, the banks set up remote branches subject to the bank size and operating conditions, but with further deregulation,city commercial banks expand the scope of cross-regional business depends more on their own size and capital levels, and little to do with the operating conditions.By the perspective of operating results of the cross-regional, the higher the degree of cross-regional, the more help to improve bank operating performance, that is increasing profitability and lowering business risk. In addition, we test the city commercial banks operating performance by the economic and financial development of the region. In the headquarters, the higher the level of economic and financial development the more help to reduce business risk, higher level of economic development led to improve profitability; in the selection of cross-regional operation perspective, the higher level of economic and financial development of the region, the more help to improve its profitability, while the higher level of economic development, the better to reduce operating risk, the higher level of financial development can not improve on controlling operational risk.Finally, with the tighten of cross-regional operation controls in recent years, business diversification, particularly diversification of assets and sources of funds business has become an important means of city commercial balance sheet expansion. Previous studies of commercial banks diversified focus on revenue diversification, we first examine the impact of revenue diversification of city commercial banks on operating performance, and find that, by the increase in intermediate business income as non-interest income, city commercial banks can significantly improve business performance that improve profitability and reduce operational risks. Among them, the revenue diversification to enhance the profitability of firms in the small banks is more obvious, and the larger ones can better reduce business risk through diversification of income. Subsequently, inspection of assets and funding sources diversification, we find that the higher the level of city commercial banks assets and funding sources diversification, the worse to the profitability and operation risk of banks From the perspective of sizes, the larger banks have the ability to reduce the adverse impact of asset and funding sources diversification.