Research On Corporate Governance Of Small And Medium Size Commercial Banks In China

The corporate governance of commercial banks is the core of the modern banking system. Recently, global economic and financial stability and development have been increasingly subject to the corporate governance of commercial banks. In particular, how to improve the corporate governance of small and medium size commercial banks has even attracted wide attentions from domestic and foreign scholars.The 2008 global financial crises, evolved from the U.S. sub-prime crisis, brought the worldwide turmoil and recession, which had a huge impact on the global banking industry. More importantly, during the crisis one of the crucial reasons for enormous loss for global banking industry, and especially the bankruptcy for many foreign well-known investment banks, is that corporate governance of banking financial institutions exists serious flaws. The subjects have become the focus of banking industry reform for domestic and foreign scholars, concerning how to improve the corporate governance of commercial banks, to strengthen risk management and strategic decisions, to refine the supervision system and incentive and restraint mechanism of commercial banks.Despite the relatively small impact upon the financial institutions in China posed by this financial crisis, the corporate governance mechanism of financial institutions still has imperfections and some fundamental issues have not been reasonably resolved. Therefore, with an insight into the causes and inspiration of the financial crisis, the risk and bottleneck of the corporate governance in the current situations and the development models for China’s commercial banks are into deep consideration, especially those small and medium size commercial banks. Currently, despite the progress made by small and medium size commercial banks in China, "the mismatch of shape and spirit" is the permanent issue for the corporate governance of banks and some problems still impede the normal operation of companies, including the company equity structure, decision-making system, supervision system, incentive and restraint mechanism, risk management system and information disclosure mechanism.Under the circumstances, it mainly discusses the relationship between the flaws of "the mismatch of shape and spirit" and the sustainable development of banks, with regard to the current situations of corporate governance for small and medium size commercial banks in China. Based on the comparison and analysis between the corporate governance models of domestic and overseas commercial banks, the author comprehensively puts forward the reform framework and future development of corporate governance for banks in China from system, management, culture and governance evaluation. Meanwhile, it explores some key and in-depth problems concerning small and medium size commercial banks in combination with important cases, not only from the theoretical angle, but mainly in practitioner’s views. It analyzes the bank cases, such as Citibank, HSBC, Deutsche Bank and Mitsubishi Bank, which would enlighten the improvement of the corporate governance for China’s small and medium size commercial banks, aiming to promote the progress further, strengthen risk management, and promote sustained and healthy development of commercial banks in China.The major research methods include literature analysis, comparative analysis and interdisciplinary research method.The main contents and structure are as follows:The first chapter is the introduction. It defines the research scope and relevant conceptions based on the research background and significance. Afterwards, it demonstrates the research ideas and methods and finally introduces the framework, innovation and shortcomings.The second chapter is literature review. This section starts with the theories and latest development of corporate governance and reviews and comments the literatures on the commercial banks governance mechanism and governance environment in a more systematic way. Based on the above, it raises the core issues of commercial banks corporate governance, which provides the proof for the theories and cases afterwards.The third chapter is the discussion of the international practices and trends of commercial banks corporate governance. Based on the basic principles of commercial banks corporate governance, it compares and analyzes the corporate governance models of four foreign commercial banks, and mainly concludes the flaws and internationally new tendency of corporate governance the financial crisis reveals. The above mentioned provides an important reference for the construction and future development of the corporate governance for commercial banks in China. The fourth chapter describes the corporate governance reform and practice for the small and medium size commercial banks in China. It argues the corporate governance reform process respectively for the state-owned banks, stock-holding and city commercial banks and summarizes the corporate governance achievement made by commercial banks, with a focus on the defections and causes incurred of the current corporate governance of commercial banks in China. The results show that although the corporate governance of the banking industry in China has made significant progress, it still needs to improve further in the following aspects:the improvement of equity structure, poorly defined responsibilities of the decision-making system, the insufficient independence of the supervision system, the strengthened incentive and restraint mechanism, risk management system defections, incomplete information disclosure mechanism. Moreover, the above imperfections can be explained by the subjective understanding, the management stereotypes, history and culture. Consequently, its future reform and development also need to start from the current situations and keeps pace with reforms and changes in other aspects. This chapter is the foundation of future development and progress of small and medium size commercial banks in China.The fifth chapter is the main analysis and comparison of the corporate governance models of foreign and Chinese commercial banks. Based on that, it proposes the new corporate governance model for small and-medium size commercial banks in China. This chapter compares corporate governance models of domestic and foreign commercial banks from the equity structure, shareholders and general meeting of shareholders, directors, board of directors, supervisors, the board of supervisors and senior management and incentive and restraint mechanism. It finally presents the new corporate governance model for small and medium size commercial banks:ownership structure diversity, the establishment of a sound corporate governance structure and implementation of independent director system, further strengthened the duties of the Board and the construction of effective power balance mechanism, the gradual development of scientific motivation and constraints mechanism.The sixth chapter proposes the reform suggestions regarding the future and development of corporate government for small and medium size commercial banks in China, from system, management, culture and governance evaluation based on the experience and lessons from domestic and foreign commercial banks. The major four reform suggestions are the following. First, to improve the system includes the upgrade of the company’s equity structure, improving the incentive and restraint system of the board of directors, supervisors and senior management and under China’s national conditions, dealing well with the relationship between senior management, the Board and Party Committee. Secondly, to improve management, mainly refers to the improvement of business decisions, supervision, incentives and information disclosure and so on, as well as the increased efficiency of risk management and corporate governance structure for commercial banks. Thirdly, the cultural cultivation involves building an advanced corporate governance culture, healthy risk culture, a type of culture taking the reasonable social responsibilities and adapting and guiding the modernization of traditional Chinese culture. Finally, to effectively launch the evaluation of corporate governance and to urge the commercial banks to improve corporate governance levels are also vitalThe last chapter is the conclusion. It gives the basic conclusions and combined with the shortcomings of the dissertation, it subsequently puts forward the research direction for the corporate governance of commercial banks in China.The innovations of this dissertation are the following.The first innovation is the research perspectives. The most previous studies are mainly focused on the improvement of corporate governance system and management efficiency for commercial banks. However, the innovations of this dissertation lie in the highlight of improving the corporate governance of the small and medium size banks in China, concerning system, management and culture based on the domestic and foreign theories and practices. More importantly, it emphasizes the influence of cultural environment and enterprise culture in China on corporate governance and afterwards puts forward the indispensible relationship between system, management and culture:improving the system is the foundation; improving the management is the key; and cultural construction is the guarantee.The second innovative is the research thinking. The past research objects of corporate governance are mainly concentrated on the whole commercial banks in China, ignoring the importance of corporate governance for small and medium size commercial banks. Particularly after the financial crisis, how to improve the corporate governance of small and medium size commercial banks has increasingly become a heated topic. This dissertation begins with the small and medium size commercial banks, and presents further the new models and improvement strategies for small and medium size commercial banks in Chin, according to the comparison and analysis of corporate governance models of domestic and foreign commercial banks.In addition, because of the limited research time and space, there are mainly two shortcomings in this dissertation, which needs continued in-depth study in the future:First, it only describes the international practices of corporate governance for the large scale foreign commercial banks, lack of the comparison and analysis of that of foreign small and medium size commercial banks.Secondly, it lacks the empirical analysis and test of improving measures for corporate governance of small and medium size commercial banks in China.