The Optimal Capital Structure Of Share-Holding Banks In China

The study of bank capital structure is based on corporate capital structure theory, This paper begins with breaking the strict hypothesis of MM theory to demonstrate the existence of optimal bank capital, additionally, three specialties of bank should be considered in capital structure(1)Assets and liabilities of banks is different from non-bank firms,capital structure is something like liabilities structure.(2)Banks are believed to be implicitly guaranteed by governments.(3)Bank capital plays different role from non-bank firms, bank capital is used to cushion risk and non-bank firms capital is long-term financial resource for development.Based on above theories, this paper models a risk cushion role of bank capital to achieve bank profit maximization. Deposit rate, share rate , the scale of non-risk assets and the risk status of bank assets is considered to have impact on optimal capital structure. Relative empirical research is done and demonstrates their relations. After modeling the optimal capital structure decision, this paper is aimed to discover the relationship of banks capital structure and their performance, and finds (l)the ratio of shot-term deposit and long-term deposit have negative relation with bank performance.(2)equity/assets have negative relation with bank performance neither. (3)bank capital adequacy have positive relation with bank performance. empirical analysis uphold the conclusion that banks optimal capital is lower than supervision capital requirements. In the end ,the paper proposes different financial options fort banks on different developing path. and puts emphases on capital instruments...