A Research On The Evaluation Of Risk-Adjusted Performance Of Commercial Banks

Under the condition of increasingly drastic competition inside and outside banking with non-banking financial institutions,risks become important factors that affect banking stability.The tolerance of commercial bank for its risks determines performance of commercial banks. In this paper,we take the risks that commercial banks assumes as most important factors that affect commercial banks' operation and bring it into evaluation system of performance of commercial banks.This paper theoretically elucidate the basical principle of how risks adjust performance of commercial banks and demonstratively evaluate the performance of commercial banks that assume different risks so as to make the methods and conclusion of evaluation of performance of commercial banks more scientific.Based on defination of basical concept such as perforamanc and risk, the paper establishes the theoretical basis on how to adjust performance of commercial banks by risks and estimates the risk-adjusted performance of 14 commercial banks in China combined with the methods of risk-computation by BIS and Basel Agreement.The paper evaluates the risk-adjusted cost efficience and profit efficience by stochastic Frontier method with panal data.By risk-adjusted performance evaluation of 14 commercial banks in China, the paper find that risks in commercial banks affect their performance mostly. The higher risky the lower performance in commercial banks. The paper also finds that risks adjust more effective in profit efficiency than in cost efficience. Commercial banks in China have potenciality in increasing profit and in reducing cost not only because the enormous market for banking but also the potenciality in enhancing the risk manegement level for them.The paper ulteriorly analyses the mechanism how risks in commercial banks come into being. Also, the paper analyses how commercial banks enhance the risk manegement level and risk assuming ability by perfecting corporate governance under competitive condition. Finallly, the paper gives reasonable suggestion for governor and policy maker.