A Study On System Innovationof Chinese Financial Institutionsin Modern Time

After the financial crisis happening from 2007 to 2009,the western financial institutions’ problems in operation and management are reviewed again such as too radical behavior, ignoring risk, greed and fraud and benefiting themselves at the expense of public interests. The behavior that seeking to maximize interests while ignoring risk and moral is profoundly reflected. Meanwhile, the innovation experiences of modern Chinese financial institutions in property right and corporate governance system, management system and operation system represented by Shanxi Banks are got more attention. It is necessary to comb and sum up these experiences and raise them to the theory height in order to guide the contemporary Chinese financial institutions to accelerate institutional innovation and reform development under the background of financial reform especially the interest rate marketization. This is the practical significance of this paper. At the same time, from the perspective of finance history, the paper compared the difference influence factors between the western and eastern financial institutional innovation. The paper pays attention to the system innovation experience refinement and theoretical analysis of modern C hinese financial institutions in order to replenish and perfect the current theory. This is the theoretical significance of this paper.The paper firstly definites the basic connotation of C hinese financial institutions’ system innovation. Then the paper reviews history evolution of modern Chinese financial institutions from the angle of finance history. On this basis, the paper focuses on combing the modern C hinese financial institutions’ innovation represented by Shanxi Banks in property right and corporate governance system, management system, operating system. The paper summarizes three experiences of modern C hinese financial institutions’ system innovation, namely culture leading, internal motivation and market driven; The paper summarizes four lessons of modern Chinese financial institutions’ system innovation and compares different experiences between the western and eastern. On this basis, the paper gives a theoretical analysis of C hinese financial institutions’ system innovation from subject, object, motivation, idea, mechanism and path. The paper interprets that why to and how to produce the system innovation. The paper clears about the principles of system innovation that the contemporary C hinese financial institutions should follow. In the perspective of C hinese traditional financial culture leading, the paper gives strategic thinking about financial institutions’ system innovation. The paper proposes the direction of system innovation that is to fulfill the organic combination between social responsibilit y and business model innovation. Finally the paper puts forward the system innovation path of contemporary Chinese financial institutions represented by commercial Banks under the background of finance reform especially the current interest rate marketization.The paper argues that financial institutions system innovation in nature means making the production output of the financial institutions from traditional denotative growth to connotative growth by informing and innovating financial institutions’ management mechanisms, stimulating the behavior subject effectiveness and reduc ing the behavior subject transaction costs within the financial institutions, improving the operating and management efficiency. Its basic connotation mainly includs three aspects, that is property right and corporate governance system innovation, management system innovation and operating system innovation. In the perspective of system, they present different levels but also have integrity and inner link. Three levels of system innovation present certain conduction and influence relationship. In addition, they are influenced by macroeconomic factors such as social, institutional, cultural, regulatory and market competition at the same time.The paper believes that modern Chinese financial institutions represented by Shanxi Banks have made a series of advanced innovation in property right and corporate governance system, management system and operation system. In property rights and corporate governance system innovation, they created the share-holding system arrangement and realized the property rights clear and the right and responsibility well-defined. They innovated stock system of copy and personal labor as capital.They built a corporate governance mechanism of "two rights separation" and established a assessment mechanism based on profit and non-performing loans.In management system innovation, they created organization system of general-branch and one-to-another banking,liquidity management system of the allocation of funds from loose bank to tighten bank, money transfer settlement system and commitments system;the internal control system of patriarchal and law guarantees and firm regulation system constraints, human resource management system of paying attention to selecting and teaching and salary incentive, accounting system of double-entry bookkeeping and financial audit. In operation system innovation, they formed the credit system of the customer credit first, the business strategy of steady prudent and paying attention to marketing information,the mixed operation system combining finance with trade, financial institutions self-discipline mechanism and a large number of financial instruments, financial technology and financial business innovation.The main experiences of modern C hinese financial institutions’ system innovation represented by shanxi Banks include: financial culture leads the finance organization system innovation; financial institutions system innovation incentive the inner power; financial institutions system innovation response to the market demand. The teaching of modern Chinese financial institutions’ system innovation mainly includes: the system innovation have not enough sensitivity and adaptability to the changes of social environment; the supervision and restriction system innovation can not keep up with the need of management; management system are not harmonious with the changing situation; traditional chinese financial institutions system innovation was not heritaged and developed.The paper argues that the common experiences of eastern and western modern financial institutions system innovation includes three aspects: respecting for people’s initiative and stimulating endogenous power is important starting point for system innovation; reflecting customers’ needs and market changes is the core foothold of system innovation; strengthening supervision and res traint, managing people and risk with system is important guarantee of financial institutions system innovation.The outstanding differences between eastern and western modern financial institutions system innovation performance in the following aspects: shareholder concentration and shareholder dispersion;unlimited liability and limited liability;supervision and restraint mechanism in property rights and corporate governance; business field and customer service object in management system.The paper argues that the motivation of financial institutions system innovation mainly lies in these aspects, namely adapting to the changes of the external environment; optimizing the internal resource allocation; breaking the internal path dependency; providing effective internal incentive. The general idea of C hinese financial institutions system innovation is to inherit the good things of their own traditions while introducing western commercial banks’ development experience mode, and to achieve the organic combination of inheritance and introduction.Financial institutions operating system innovation should be for the purpose of time-varying, effectiveness, adapting to customer needs and multiple game equilibrium with regulation policy. Management system innovation should be for the purpose of customer-centered, market-oriented, saving management costs and improving management efficiency in order to boost the operational efficiency.Property right system innovation shuld target for establishing value(benefit) maximization management objective, effective balances of corporate governance mechanism and effective incentive mechanism of the managers assessment system.This paper analyzes the relationship between the financial cultural and financial institutions innovation from three aspects, namely the relationship between internal and external behavior, the relationship between purpose and rules, the relationship between subject and environment. Financial culture influences financial institutions innovation from four pathes: financial culture influences managers who in turn affect financial institutions management behavior and system innovation; financial culture leads to the changes of external business environment of financial institutions which in turn affect the system innovation adaptively; financial culture penetrates the industry self-discipline which in turn affect financial institutions system innovation; financial culture reduces transaction costs and promotes finance institutions system innovation.The system innovation of Chinese financial institutions should be guided by enterprise culture and values which should be complied with Chinese traditional financial culture. Contemporary Chinese financial institutions represented by commercial Banks should inherit and carry forward the Chinese traditional financial culture and should also innovate and develop it reasonably combining with the current reform and development.The institutions should build the modern financial culture system which is characteristic of eleme nts such as honesty, rightness and benefit and harmony as its core connotation in order to guide the financial institutions management and system innovation.Finally, the paper argues that the market-oriented interest rate reform is moving forward rapidly at present. The financial competition is more and more fierce. O n this background,represented by the commercial bank of Chinese financial institutions should strive to promote the system innovation from five aspects:to promote the property right system reform to make property rights clear, to ensure the effectiveness of the financial institutions operating purposes;to improve the existing corporate governance mechanism which’s likeness is greater than spirit, to enhance the effectiveness of corporate governance by integrity as a fundamental;to stimulate the internal agency "human" initiative, to perfect the internal incentives;to take the customer as the center, to perfect the management system, to optimize the management process; to innovate management system of market-oriented, to make the market management system effective.This paper has four main innovation points. Firstly, the paper summarizes practices of modern C hinese financial institutions’ system innovation systematically. O n this basis, the paper refines three experiences of system innovation, namely financial culture leading the finance organization system innovation; financial institutions system innovation incentiving the inner power; financial institutions system innovation responseing to the market. The teaching of modern Chinese financial institutions’ system innovation mainly includes: the system innovation have not enough sensitivity and adaptability to the changes of social environment; the supervision and restriction system innovation can not keep up with the need of management; management system are not harmonious with the changing situation; traditional chinese financial institutions system innovation was not heritaged and developed.Secondly, the paper analyzes and puts forward the principles of financial institutions’ system innovation. Financial institutions operating system innovation should be for the purpose of time-varying, effectiveness, adapting to customer needs and multiple game equilibrium with regulation policy. Management syste m innovation should be for the purpose of customer-centered, market-oriented, saving management costs and improving management efficiency in order to boost the operational efficiency.Property right system innovation shuld target for establishing value(benefit) maximization management objective, effective balances of corporate governance mechanism and effective incentive mechanism of the managers assessment system.Thirdly, the paper puts forward relationship between the financ e cultural and financial institutions innovation from three aspects, namely the relationship between internal and external behavior, the relationship between purpose and rules, the relationship between subject and environment. O n this basis, the paper analyzes the impact of the financial culture from four pathes, namely financial culture influences managers who in turn affect financial institutions management behavior and system innovation; financial culture leads to the changes of external business environment of financial institutions which in turn affect the system innovation adaptively; financial culture penetrates the industry self-discipline which in turn affect financial institutions system innovation; financial culture reduces transaction costs and promotes finance institutions system innovation.Fourthly, the paper gives a strategical thinking about the characteristic system innovation of contemporary Chinese financial institutions.The paper puts forward the idea that by carring forward and innovating the traditional C hinese financial culture,by building a consistent system of contemporary Chinese financial culture to lead the system innovation.The paper points out the strategic direction of financial institutions system innovation under the Chinese financial culture, that is the organic combination of innovating business model and performing the social responsibility.The main deficiencys of this paper are as follows. The paper does not further discusses the modern C hinese financial institutions’ interactive relationship with new style banking in the evolution process, not giving a further analysis of culture split and model difference between new style banking and the traditional financial institutions. The analysis of the influence of industry self-discipline mechanism to the modern Chinese financial institutions’ system innovation is not enough. Under the background of marketization, how the industry self-discipline mechanism cooperating with the regulation and how they commonly incentiving and constrainting financial institutions system innovation needs to be further stud ied. In addition, the qualitative analysis method is used more than the quantitative method in theoretical analysis. The paper needs further thinking in model building and measurement test.