Research On Economic Value Added For Chinese Commercial Banking In Value-based Management Perspective

Banking is one of Chinese pillar industries, and it could hold the balance for the development of national economy. Both academia and banking sector have a general accepted ultimate goal, which is to boost the value-adding ability of commercial bank and make bank value maximization as the common interest for stakeholders such as shareholders, bank managers and operators. Facing the increasing fierce competition in financial market and stringent capital regulation, how the commercial bank applies Value-based Management to optimize internal operational mechanism, and turns passive adapt regulatory requirement into initiative risk control in value maximization process, could be the significant issue to stimulate banking sustainable and scientific development in China. Therefore, there is theoretical and realistic significance to explore and establish value-adding index to evaluate the value-added ability of commercial banks, deeply analyze influence factors and seek strategic approach to raise bank’s value-adding ability.In recent years, Value-based Management, which is one of modern enterprise management systems, is applied more and more widely in banking sector. This research reviews some relative researches, and illustrates the theoretical foundation and reality application of Value-based Management for commercial banks. In view of the specificity and external capital regulation of banking, the author brings up Economic Value Added for banking(EVAbkg) model with the reference of traditional Economic Value Added(EVA) model, and runs the empirical test of EVAbkg model by analyzing value-added situation of 16 listed commercial banks in China. The result shows that EVAbkg index matches the performance of commercial banks in capital market more perfect than tranditional EVA index, and it could combine the external regulatory requiremints and commercial banks’ goal of maximizing value closely, effectively balance the capital input, profit and risk of banks, and thus reflects the real value of commercial banks more accurately.On the basis of EVAbkg index, referring to the ―4M‖ system of EVA value management, the research further analyzes the influencing factors through Performance Measurement, Management System, Motivation Mechanism and Mindset System perspectives, and then applies panel data analysis method to research financial data of 8 listed commercial banks. Base on the elasticity of influence factors, the research designs the approach to improving value-added ability of commercial bank by ―Value Tree‖ analytical method, and discusses the strategic path leading to value maximization. The research proposes to improve commercial bank value-adding ability thorough strengthens the incentive mechanism of management, optimizes risk management indicators and explores reasonable credit scale, finally, forms an integrated EVAbkg–based Management system. In conclusion, introducing EVAbkg index to Chinese banking, and establishing a new value assessment and performance management process according to external capital regulation, would increase the core competitiveness of commercial bank in China, promote sustainable development, and achieve management inspiration for commercial bank value maximization.