The Research On The Corporate Governance Reform And Efficiency Of Rural Credit Cooperatives

When the rural credit cooperative (RCC) is defined as a finance enterprise, the problems such as how to enhance its management, transfer its working mechanism, increase its profit and improve its serving ability et al. become more and more important. The new round institutional reform of RCCs in August 2003 allowed RCCs choose different models of ownership that fit in their situations, and design right framework of corporate governance in order to improve their management. Until today the development of RCCs looks good. Based on the datas of the China's Banking Supervision Committee, the average capital adequacy of eight provinces that started reform earlier achieved 7.38% and made total profit more than 25.16 hundreds million. But the question is how much profit they made come from the improvement of RCCs' management? Dose the clarification of property rights of RCCs and the new framework of fcorporate governance solve the difficult problem of RCCs management? Is the corporate governance of different ownership structure all effective? All these questions need us lucubrate.The primary aim of this research is to make comprehensively study on the corporate governance of RCCs, supply reference for the farther reform of RCCs in administration and property right. In order to achieve this aim, three questions need to be solved: firstly, investigate and commentate the status of corporate governance of RCCs; secondly, measure the efficiency of corporate governance of RCCs during nearly ten years; thirdly, decompose the reasons of the efficiency changes, so as to find out the problems inside the corporate governance of RCCs.Under these aims, there are three important parts in this research:Part One, we investigate the status of corporate governance of RCCs, then in the frame of game theory we explain the problems of insider control and government interventions to RCCs. We also analyze the special agency problem of RCCs that the government acts as a straightforward governor outside; expect to find the right way decreasing agency cost.Part Two, taking the X-inefficiency as criterion, we measure the governance efficiency of RCCs in Jiangsu Province since 1997. We compare the X- inefficiency of different RCCs in different years, different areas, different scale groups and different ownership structure, so as to reflect comprehensively the change of governance efficiency of RCCs.Part Three, focus in the management inside, we decompose the reasons of the efficiency changes of RCCs. We realize this purpose also through three channels: first of all, we analyze the working characteristic of inefficiency RCCs. Secondly we analyze the effect of the reform of ownership structure to RCCs, because the ownership structure is the foundation of corporate governance, and the reform of ownership structure to RCCs is carrying on every where. Thirdly we analyze the relationship between the governance mechanism and the governance efficiency, in order to find out the characteristics in favor of improving governance efficiency of governance mechanism.The major results of this research are:(1)Because of the dispersive ownership structure, the cost of supervision of investors outside is so high that they are unwilling to supervise the managers inside and the problems of insider control still remain. At the same time, the newly round reform asks the provincial governments responsible for the administration and the last resort for RCCs, so more responsibilities for the Federation mean more interventions to RCCs operation.(2)The mainly difference of corporate governance in different ownership structure is the proportion of equity capital owned by corporative investors and owned by senior mangers. The proportion of equity capital owned by corporative investors and owned by senior mangers in the rural commercial banks and cooperative banks is higher than in the RCCs.(3)The X-inefficiency of RCCs from 1997 to 2005 in Jiangsu Province is not low, and the average X-inefficiency is 48%, that means the wasting of resource in RCCs is very heavy. But after 2000, when reforms of RCCs are carried on more comprehensivly, the governance efficiency becomes better and better.(4)During the facts that affect the corporate efficiency, the effect of bad loans is the most evidence, secondary is stuff education degree, and thirdly is non-interest income and ratio of loan to deposit. We analyze the effect of reform about ownership structure and find out that the reform has a whole good effect which embodies the efficiency has improved obviously after the property right reform. However, the efficiency improvement results from the expansion of business scale. As a result, the scale expansion accompanies the big rise of average per capita expenditure and the risk control is somewhat ignored. It is proved that RCCs have chosen an increasing road of the extensive type under which the increasing effect is very distinct in the short term. But the hidden trouble behind the method shouldn't be ignored. It is doubtable whether the method is sustainable or not.(5)The relationship between governance mechanism and the governance efficiency reflects that some measures about corporate governance carried in this reform can improve the governance efficiency of RCCs, but some measures may depress the governance efficiency. We find out that the existence of larger shareholders is good to governance efficiency, because larger shareholders are more willing to supervise mangers; the existence of independence director can also improve governance efficiency; that stuff holds shares can prompt stuff working hardly, so it can improve the governance efficiency. Because of the absence of conscientious corporation shareholders, the relationship between the portion of corporation shareholders and governance efficiency is not evident; the effect of intendance union is also oppressed; the portion of owned by the senior mangers is too lower to prevent them seeking self-interest from operation.