Research On The Relationship Between Commercial Banks' Capital Structure And Business Performance

Our government has gained great achievements on the reform of financial system since the Reform and Opening-up. From the separation of the central bank's business, foundation of the four state-owned commercial banks and the development of the latter burgeoning shareholding commercial banks to the shareholding reform of the state-owned commercial banks, introducing strategy investors from overseas and the leapfrog of the shareholding commercial banks, our banking system has come through the conversion from a highly united banking system to an opening and competitive banking system with diverse character. On the other hand, our country has entered the WTO and in the end of 2006 we opened our financial market to the world. This means not only our financial enterprises has involved into the global economy, but also our commercial banks and other financial institutes would face up more competitors from other countries. So it is vital for any commercial bank in any country to learn how to survive and develop in the more competitive market. Thereby enhancing the business performance of the commercial bank becomes the essential solution. In reality, the irrational capital structure of the commercial bank leads to the result that it's hard to constitute an effective supervision structure and that the supervision mechanism can not perform effectively. Consequently, all mentioned above restricts the elevation of the commercial bank's business performance. So the research on the relationship between commercial banks'capital structure and business performance has a great sense for the reform of our commercial banks.Aiming at the above problem, this paper has selected a more suitable evaluation index that is the EVA (economy value added), which can reflect the business performance more exactly. Then according to the condition of our commercial banks'capital structure and the business performance reflected in the valuation index return of EVA, the method of regression has been used to analyze the relationship between commercial banks'capital structure and business performance. Finally, based on the research above, this paper puts forward the corresponding suggestions. As a whole, this paper contains the following four parts:The first part is about capital structure and the corresponding theory. First, it explains the meaning of the capital structure by comparing with the financial structure, financing structure and the ownership structure. Then, it summarizes and analyzes the corresponding theory on capital structure. Finally, it sums up the composing and the character of the commercial bank's capital structure. This part serves as an academic basic for the paper.The second part is about the selection of the evaluation index on the business performance of the commercial bank. By comparing to the generally used evaluation index, this part introduces the method of EVA. Taking the special quality of commercial banks into account, it modifies the method of EVA.The third part is about the empirical study on the relationship between commercial banks'capital structure and business performance. This is the main body of the paper. First, it introduces the general situation about our commercial banks since the Reform and Opening-up. Then, it analyzes the present situation about our commercial banks'capital structure and the business performance of our commercial banks in detail. After that, the method of regression has been used to analyze the relationship between commercial banks'capital structure and business performance.The forth part is about the conclusion and suggestions. This part sums up the result of the empirical study and puts forward the suggestions according to the empirical result. In the end it figures out the shortcoming of the paper and the further study direction.