A Study Of Foreign Investment's Effect To Chinese Commercial Banks' Composite Valuable Creation Capacity

Since2000, together with the transformation and the opening of the bank system, the operation level and the competitiveness of Chinese commercial banks have also been improved. Among the process of transformation and development, the penetration of foreign investment is undoubtedly the most striking phenomenon. Nearly all commercial banks, including joint-stock banks and state-owned banks have attracted foreign investors in order to promote their business results. With this background, it's valuable and practically significant to know about the change of Chinese commercial banks' operation level, evaluate their strategies and the role played by foreign investors in their operation.Many researchers have studied the relationship between the penetration of foreign investment and the performance of commercial banks, While much of them based on the short-term evaluation system such as financial index or efficiency index, which cannot reflect the integral status of commercial banks. Also these researches were lack of theoretical analysis. Based upon these backgrounds, this dissertation has come up from the evaluation of commercial banks' performance and discussed the effect of strategy investment of foreign investors to Chinese banks'composite value creation capacity. Firstly, this dissertation intends to setup an integrated indicator to illustrate the composite value creation capacity of the Chinese commercial banks based on their profitability, safety, liquidity, scale, managerial structure and long-term development capacity. Secondly, we discussed the effect of foreign invest to host country's commercial bank at theoretical level and pointed out that foreign invest can affect domestic banks' composite value creation capacity in two ways:one is to promote domestic bank's technology progress, and the other is to improve domestic banks' managerial structure, while the specific results will depends on domestic banks' technology base, market structure and the character of foreign investors. Thirdly, Using12Chinese main commercial banks as the sample, this dissertation has calculated their composite value creation capacity index. Finally, based upon the result, the study examined the effect of foreign invest in Chinese commercial banks with the econometrics model and case study. Through theoretical analysis and empirical test, we conclude that the composite value capacity of Chinese commercial banks has improved in recent years, but this achievement is mainly caused by financial growth of China and the joint-stock reformation of the state-owned banks but not the strategy investment of foreign banks. But in some aspects, the entrance of the foreign investment also contributed to the development of some banks.The main creation of this dissertation can be summarized as below.(1) Aiming at the flaw of the existing performance evaluating index of commercial banks, this dissertation has constructed a new set of Composite Value Creation Capacity Index concluding profit, safety, liquidity, scale, managerial capacity and long-term development capacity, which is useful to the sustainable development and stably operation of commercial bank market that face to high risks and high backwards.(2) Focus on the technology-transfer effect and the management structure's improvement effect, this dissertation has discussed the effect of foreign invest to domestic commercial banks' composite value creation capacity as well as the mechanism in theoretical level, and given the political suggestions from both macro (industry) and micro (enterprise) level.(3) Used12Chinese main commercial banks as the sample, this dissertation calculated and evaluated their composite value creation capacity so that it can reflect Chinese commercial banks' operation conditions more accurately.(4) By removing the effect brought by the development of Chinese economy and the Joint-stock reform of Chinese state-owned banks, this dissertation examined the foreign investors' efforts to Chinese commercial banks'composite value creation capacity by setting up econometric model, so that it can give a more accurate judgment about the reason behind the promotion of Chinese commercial banks' performance.