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Analysis Of Soft Budget Constraint On State-owned Commercial Banks In China And Effects On Incentive Mechanism

Posted on:2006-12-04Degree:MasterType:Thesis
Country:ChinaCandidate:P Y ChenFull Text:PDF
GTID:2179360155972235Subject:Finance
Abstract/Summary:PDF Full Text Request
At the present time, soft budget constraint (SBC) exists in state-owned commercial banks (SOCBs) at large. It not only makes an important effect on management of banks in microcosmic field, but influences financial safety and the development of national economy in a way. But the study of domestic scholars emphasizes on the phase of foregone state-owned enterprises reform, and involves the SBC in banks less. The paper just starting from this point, considering the important role of human resource in bank industry, analyzes the cause and the status in the period of economy transition of SBC in SOCBs. On the base, the author researches and compares the effect on which SBC makes the main incentive mechanism and evaluate index, and gives some policy-related proposal. At first, on basis of the large amounts of bad assets and specific trust-agency relation in state-owned banks, the paper draws a conclusion that the cause of bad assets in SOCBs is policy burden. As a result, the direct cause of SBC in SOCBs is policy burden, but the essential cause is the structure of property right of state-owned banks. Then, according to the analysis on financial information of state-owned banks, the author demonstrates this conclusion. Because of that, to eliminate the SBC, we must carry out the reform of stock-holding system. In view of it, the paper analyzes the Chinese path of economy transition and statistical data on the bank reform of stock-holding system from other countries, especially developing countries and former socialism countries. Afterwards, the author thinks the soft budget constraint in SOCBs will be weaken, but will exist for a period by way of policy burden before elimination. Going on this premise that the policy burden will exist, the paper analyzes the effect it makes on main incentive mechanism in SOCBs by means of incomplete dynamic game. After contrast, the mixed incentive mechanism composed by dominant and recessive incentive factors make the bank agency cost least, but production most. In this section, the paper uses the method of evaluation outstanding achievement in financial management to modify the index of EVA, making it accord with the fact of state-owned banks under policy burden more.
Keywords/Search Tags:State-owned commercial bank, Soft budget constraint, Policy burden, Incentive, Reputation mechanism
PDF Full Text Request
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