An Empirical Study On The Determinants Of Capital Structure Of China's Commercial Banks

With China's rejoining WTO and the financial sector's opening up to the outside world, it has been one of our important tasks to establish a modern commercial bank system and to build up bank's competence of our country .It requires that commercial banks should promote their market competence, improve corporation governance, and optimize capital structure to counter the strong impact from market competition and foreign banks.First, taking the capital structure decision theory as the instruction, and combined with banks'particularity, the paper has primarily analyzed our country commercial bank capital structure, then has obtained the characteristics such as insufficient capital, lacking the mechanism of capital supplement, the high property debt rate, the insufficient preparation supplements and the low internal financing ability. Second, based on the analysis above, the paper has concluded the macroscopic and microscopic factors affecting our country commercial bank capital structure, then has empirically studied the microscopic factor influencing our country commercial bank capital structure. The empirical study has applied the methods of the principal components analysis and the multiple regression analysis to establish our country commercial bank capital structural model, which has used 16 commercial banks'data disclosed in their annual financial reports from 2001 to 2005. The results of the empirical study imply that there is positive correlation between property debt rate and the bank scale, possibility of growth, cost of financial distress, income tax, and capital cost as well; whereas there is negative correlation between the property debt rate and the bank profitability and non-debt tax shield. According to the empirical study results and our country commercial bank capital structure's characteristics, the paper finally presents some suggestion to optimize our country commercial bank capital structure, which includes introducing various funds to increase actual receipt capital, improving the asset quality to reduce bad loans ratio, strongly developing the middle-services to increasing the bank profitability, reducing or exempting the tax to supplement the capital, revaluating the fixed assets, and strengthening financial supervision.