The Effects Of Foreign Shares On Chinese Commercial Banks' Performance

Commercial banks constitute the most important part of banking, which is the core of a coun-try's financial sector. The competitiveness of commercial banks affect the speed and level of a country's economic directly. Commercial banks of China lag far be-hind of the Western Countries'for some history reasons. They are in low level of corporate governance and lack of development power, which lead to poor performance in financial reports. Chinese commercial banks expect to add capital of bank, learn advanced experience of corporate governance and excellent operation ability, enhance the competitiveness with bringing foreign strategic inves-tors.First, we study the history of introduction of foreign strategic investor and the reason of the intr-oductioa Then we analyze the effects of foreign entry to Chinese commercial banks on capital adequacy ratio, profitability and innovation, level of corporate governance, assets quality, risk management ability and so on.At last, we use panel data to do empirical research to get the result that foreign entry can improve the operation efficiency of the banks which have brought foreign strategic investors. We also analyze the optimal proportion of foreign shares which aff-ect the profitability and innovation of the banks. We prove that there is a period of adjustment which lasts for 1-3 years for local and foreign shareholders.In the end of the paper, we analyze the argument of whether Chinese commercial banks have been sold cheap and the reason of China Agriculture Bank's and China Everbright Bank's IPO without bringing foreign strategic investors. We think foreign strategic investors are not useless or threatening. We should have a dialectical view on the effects of foreign investors and bring foreign investors more rationally. We should improve the level of corporate governance further through the help of foreign investors. Meanwhile, the regulators should improve the ability of supervision, the relevant laws and regulations.