Research On Impacts Of Foreign Capital Entering And Purchasing Shares On Joint-Stock Commercial Banks' Performance

After joining WTO, China's banking industry has kept on opening up, with its pace for foreign capital purchasing shares of native banks continuously accelerated. Introducing foreign shareholders and intensifying cooperation with international banking industry have become the key steps for institutional innovation of native banks as well as their important strategic choice. After entry into WTO, China has strengthened the opening up of banking industry. In recent years, several foreign financial institutions have purchased shares of native banks. Their share (equity) participation objects, besides three state-owned commercial banks, were mostly joint-stock commercial banks. Foreign banks'involvement into China's banking industry has been deepened, their cooperation with joint-stock commercial banks closer and their correlation with management and administration, profitability of China's banking industry and even joint-stock commercial banks strengthened constantly. In the cooperation with foreign capital, joint-stock commercial banks, in terms of financial indexes, be it total amount of assets, profit or assets quality, all have enjoyed remarkable improvement, and their power has been enhanced markedly.The paper reviews the development of foreign capital purchasing shares of China's joint-stock commercial banks, explores the background, characteristics of purchasing shares and its impact on joint-stock commercial banks, analyzes through mathematical model foreign-funded banks'position in the competition with native banks after its entry into China and the impact on the whole banking industry, and meanwhile, against foreign capital purchasing shares of joint-stock commercial banks , conducts further analysis through DuPont analysis on changes of capital adequacy, non-performing loan rate and assets rate of return after foreign capital participation. The result indicates that before the entry into WTO, foreign capital only owned small proportion of shares, its development in China had not posed threats to native banks; after the entry, with foreign capital's size ever expanding, its influence rises more and more, and competition comes with cooperation between foreign and native banks. In this stage, joint-stock commercial banks capital adequacy, non-performing loan rate and assets rate of return have all improved remarkably, and applying DuPont analysis shows that relevant financial ratios of joint-stock commercial banks have been largely optimized, which indicates that foreign capital purchasing shares enriches the capital of joint-stock banks, improves their management and administration, perfects their internal control system, lowers the capital-operating risk, and enhances the capital-operating efficiency as well as the profitability, thus proving that introducing strategic investors is a feasible road for China's bank reform.To study the positive and negative influence on native banks after foreign capital entering China's banking industry, especially through cooperation with joint-stock commercial banks by purchasing shares, as well as some problems in the participation, will help lead foreign capital purchasing shares to healthy and orderly path, which can provide reference for city commercial banks when introducing foreign capital.