A Study On The Innovation In The Property Rights System Of State-owned Commercial Banks

Whether the property rights system of SOCBs is effective is crucial to the allocation efficiency of financial resources and to the efficiency of the savings in the society channeled to the investment. Distinct property rights underlies the function system of modern enterprises. But till now the reform of SOCBs has not reached to the key problem of property rights system. This paper is to illustrate the importance of innovation in the property rights in SOCBs of China on the basis of property rights theory, along with which new ideas are proposed about the innovation in property rights system of SOCBs in China given the experience of property rights reform in the world. It is pointed out that share-holding system reforming is proper for the innovation in property rights system of SOCBs in China, with the concrete steps provided in the final part of this paper.The framework of this paper is as following:Part 1 gives the general theory of modern property rights, beginning with discrimination between property rights and ownership according to the definition of property rights by Damsets, Coase, and Alqin and so on. Then what determines the effective function of property rights is provided. Finally, the basic features of modern property rights system are offered after above analysis.Part 2 examines the current situation of property rights system of SOCBs in China, mainly from the point view of principal-agent behavior within the framework of state exclusive investment. Firstly it is pointed out that the biggest risk confronting the SOCBs is that made by man with the assumption of utility maximization, limited rationality and opportunistic inclination. Precaution against risks by virtue of man is the key to the arrangement of institution because " kind one" has no impulse to do wrong but "bad one" has to do that at high expense if the institution is effective. Secondly, the paper studies the three types of principal-agent relationship within the framework of state exclusive investment: (1) government-president of banks relationship. In this kind of principal-agent relationship, as a majority in the ownership and investor from outside, the government commits the capital of banks to the president, with sovereign creditguaranteed to absorb large number of deposits and with the expectation to the president of bank to run the capital according to the maximization of state interests. But this kind of administrative relationship on one hand is not helpful to the complete commercial operation on capital by reason of the decision-making power of banks controlled by the government; on the other hand chances are that the manager of the bank pays little attention to risks, which will result in the losses government can neither supervise nor control but has to undertake finally. The only effective means to control the bank is the power of appointing and dismissing the head of the bank, which however will give rise to soft constraint in governance structure. (2) The head of bank-manager of enterprise relationship. It is derived that PA=k*PD, in which PA stands for the ration of profit to asset, k is the ratio of debt to asset, and PD is the interest rate of debt. The formula shows that the basic reason for increasing k is the low PA of SOEs. In fact, SOEs with low PA usually take the policy of maximizing the bank debts. However, the deeply explanation for low PA of SOEs is the opaque principal-agent relationship as well as the improper corporate governance structure. So the commercial banks had better make relevant institutional arrangement in accordance with the changing circumstances thus reducing the instability of two-party relationship. (3) Head of bank at high level- head of bank at lower level relationship. The superior-inferior relationship in detail is following: headquarter of the bank-provincial branch-district branch-county branch-small local branch-saving office. This multilevel administrative system stratifies the principal-agent relationship, which distorts the information because of the prolonged tran...