Research On Dynamic Incentive Mechanism Of The Branch Governors In Commercial Banks

To ensure governors in the branches of the commercial banks to fully exert their talents, one key factor is to establish an incentive & restriction mechanism. With the advent of financial market's fully open to foreign entities in 2006, it is a key step to properly motivate these presidents in the branches, which can ensure the competitive advantages of domestic commercial banks in the international markets.Domestic commercial banks have some problems such as special property rights structure, long trust-agent chain, incompletely competitive environment, and information asymmetry. These problems will lead to branch presidents'moral risks. The branches play determining roles in commercial banks as they are basic operating units and are in the first line of commercial banks. Whether the presidents will exert their business and managerial abilities largely determines the performance of the corresponding branches. As a result, it is extremely important to study the incentive mechanism as to the presidents in the branches of commercial banks.This article discusses incentive mechanism using principal-agent theory and incentive theory, figures out some problems in present incentive mechanism, and discusses the special characteristics of the incentive mechanism as to presidents in the branches. In the study of the model of incentive as to presidents in the branches, this article makes some adjustments to the income function of banks, and categorizes the factors which influence the income of banks into two kinds. And according to this point, I build a dynamic incentive model as to presidents in the branches, and offer some suggestions on the incentive mechanism as to presidents in the branches of commercial banks.