| Commercial banks play a central role in China’s financial resources allocation.Before the Reform and Opening-Up,the People’s Bank of China played the roles of both central bank and commercial bank;after the Reform and Opening-Up,large commercial banks and joint-stock commercial banks were successively established.In recent years,city commercial banks which are positioned to serve local economy have gradually developed into an important part of China’s banking industry.The proportion of city commercial banks’ total assets in the total financial institutions’ assets has gradually increased from 5.3% at the end of 2003 to 12.80% at the end of 2018.Although the proportion of total assets has increased significantly,city commercial banks still differ largely from joint-stock commercial banks and large commercial banks in terms of risk management.Therefore,it is necessary to study city commercial banks’ financial resources allocation in China,which can provide more targeted theoretical support for policies’ effective implementation as well as more suggestions for city commercial banks’ future development.Existing literature has conducted in-depth discussions on “bank competition”,“credit cost”,“bank risk”,“bank regulation”,etc.These studies provide helpful theoretical basis and research method basis for this paper.However,there are still many inconsistent conclusions in the existing research of financial resources’ allocation,which might be because that there are differences between researching from the perspective of non-financial firms and researching form the perspective of banks,as well as there are differences when researching on different types of banks.Moreover,existing studies are mostly based on western banking competition theory and financing theory;however,research on China’s commercial banks should pay more attention to China’s institutional environment and governance characteristics,especially for the theoretical research on China’s city commercial banks that urgently need to find their own development path.Since 2006,city commercial banks’ information disclosure standards have gradually improved,and the improvement of data availability has provided a great opportunity for the paper to study commercial banks based on the Chinese context.Compared to large commercial banks and joint-stock commercial banks,the small scale of city commercial banks can alleviate endogenous problem caused by commercial banks affecting external market environment.Regulation changes can also provide external shocks and helps alleviating endogenous problem.In addition,making use of city commercial banks’ regional operating characteristics to build panel data can also alleviate time trend problem to some extent.Under the above background,this paper takes China’s city commercial banks as research example and analyze how provincial environment and internal governance structure affect city commercial banks’ financial resources allocation from multiple perspectives.Specifically,the paper analyzes the influencing factors and risk effects of city commercial banks’ loan interest rates from the perspective of provincial banking structure as well as the moderating effects of internal governance structure(Chapter 3);and analyzes the influencing factors and risk effects of city commercial banks’ loans’ industry distribution from the perspectives of local government industrial policies as well as how they differ in different banking market structure and different internal governance structure(Chapter 4).Preventing and resolving financial risk is an important task for commercial banks to achieve good financial resources’ allocation,and provision coverage measures commercial banks’ risk management qualities.Therefore,the paper further analyze the influencing factors of city commercial banks’ provision coverage from the perspective of inter-provincial operating regulations(Chapter 5).With the tightening of bank regulation,commercial banks tend to cope with competition through doing off-balance-sheet business,and the rapid growth of shadow banking has led to banks’ systemic risk expansion.Since city commercial banks have larger shadow banking business,and compensation incentive in internal governance can effectively adjust management’s risk preference.Therefore,the paper also analyzes the influencing factors of city commercial banks’ shadow banking from the perspective of executives’ compensation’s deferred payment policy(Chapter 6).The paper’s main research conclusions are as follows:Firstly,the higher the banking concentration,the lower the interest rates of city commercial banks,and the higher the non-performing loan ratios.High provincial banking concentration means that the provincial banking industry is monopolized by large commercial banks and joint-stock commercial banks;therefore,city commercial banks have to reduce loan interest rates to compete for loan customers.In addition,when banking concentration is high,city commercial banks that have not implemented inter-provincial operation,are non-state-owned,and have not implemented deferred payment policy of executive compensation are more likely to reduce loan interest rates.When banking concentration is high,the reduction in city commercial banks’ loan interest rates will attract high-risk customers and increase non-performing loan rates.Secondly,if the city’s commercial banks’ loan customers or loan industries belong to industries supported by the local government industrial policies,their loan ratios are lower compared to others.Although existing literature shows that firms supported by industrial policies are more likely to obtain financing,this paper finds that provincial local government industrial policies have a crowding-out effect on related loans to city commercial banks,especially for city commercial banks in provinces with high banking concentration.Further tests show that,the greater the amount of loans issued by city commercial banks to firms supported by local government industrial policies,the higher the city commercial banks’ non-performing loan ratios.However,after the city commercial banks implement deferred payment policy of executive compensation,the loan issuance guided by local government industrial policies will not lead to city commercial bank’s financial resources’ allocation efficiency decline.Thirdly,when a city commercial bank,especially a city commercial bank audited by Big Four audit firms,prepares to apply for a new inter-provincial branch,it tends to increase its provision coverage;however,after the application is completed and the new branch is opened,the city commercial bank tends to reduce its provision coverage.City commercial banks are positioned as regional commercial banks.When applying for the opening new inter-provincial branches,they need to be reviewed and approved by regulators.Therefore,in order to release a positive signal to the regulators,city commercial banks tend to increase provision coverage when preparing to apply for new inter-provincial branches.After the application is approved,city commercial banks’ motivation to send a positive signal to the regulators through increasing provision coverage reduces,and the motivation for earnings management through reducing provision coverage significantly increases.Fourthly,compared with city commercial banks that have not implemented deferred payment policy of executive compensation,city commercial banks that have implemented deferred payment policy of executive compensation have a smaller shadow banking business.The deferred payment policy of executives’ compensation can effectively increase city commercial banks’ executives’ sensitivities of bank risk-taking behavior.After implementing the deferred payment policy of executive compensation,city commercial banks’ executives will consider more about future potential risks when expanding business,and be more cautious when developing shadow banking.Therefore,city commercial banks’ shadow banking will be negatively affected.In addition,the negative impact is more significant in city commercial banks with poorer performance and higher level of risk-taking.The placebo test rules out the possible effects of temporal trends caused by external environment change on these results.The paper’s research innovation is mainly reflected in the following three aspects:Firstly,the paper examines influencing factors of financial resource allocation from the perspective of commercial banks.Existing research on financial resources allocation is mainly from the perspective of firms-the resource demander,such as whether the firm can obtain credit financing,whether the financing cost is reduced,and whether it can promote the firm’s growth or investment after the firm obtaining credit resources.This paper chooses to analyze influencing factors and risk effects of financial resources allocation from the perspective of commercial banks-China’s main financial resources provider.Therefore,on the one hand,this paper enriches relevant literature on financial resource allocation;and on the other hand,this paper can provide a basis for decision-making for supervising commercial banks by financial regulators.Secondly,the paper focuses on the influencing factors and risk effects of city commercial banks’ financial resources allocation in China from the perspectives of both provincial regional environment and internal governance structure.Due to data constraints,existing research on financial resources allocation of is mainly based on listed banks data or Bankscope database.Compared with large commercial banks and joint-stock commercial banks,city commercial banks not only have differences in credit scale,corporate governance characteristics,etc.,but also face competition and bank regulations with significant regional characteristics.Taking city commercial banks as the research sample,this paper is helpful for developing a more targeted analysis of China’s commercial banks’ financial resource allocation,and making more effective policy recommendations to prevent and resolve financial risks.Thirdly,the paper further tests the transmission mechanism from macro policies to micro bank decisions.This paper takes the regional environment as a starting point,combines macro policies with commercial banks’ behavior and decision-making,and explores the theoretical basis and transmission mechanism of how the provincial regional environment affects city commercial banks,as well as the moderating effects of banks’ internal governance structures,which further expands the research framework of macro polices and micro behavior.Deepening financial supply-side structural reform is an important task in China’s financial industry in recent years.Among them,“strengthening financial services to the real economy”,“strengthening optimizing the structure of financial system”,and “strengthening financial risks prevention” are important contents of the reform.The results indicate that,firstly,bank regulators and local governments should guide healthy competition among city commercial banks.In the premise that city commercial banks base on serving local economy,joining in inter-province bank competition can improve banks’ operating efficiency.Secondly,bank regulators should further perfect relevant policies targeting on commercial banks’ core regulating indicators and reasonably treat city commercial banks of different development levels and city commercial banks in different development regions.Finally,to prevent and resolve financial risks,it is necessary to start from the main financial market subject-banks,and improve resources allocation efficiency internally.Only effectively improving the internal corporate governance and risk management system of city commercial banks can fundamentally improve financial resources allocation efficiency for both individual banks and the banking industry as a whole.This paper is of significance for improving financial resources allocation efficiency of city commercial banks-typical representative of small and medium-sized banks,which helps to better serve the development of small and medium-sized firms,to optimize local financial system,and to prevent and resolve systemic financial risks. |
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