Research On Factors Affecting The Performance Of China's Commercial Banks

This article first summary the factors that impact the performance of commercial banks,then introduce the hypothesis about the performance of banks,including Structure—Conduct—Performance hypothesis(SCP),Relative Market power Hypothesis(RMP),Effcient Structure Hypothesis(ESX),Eficient Structure Hypothesis (ESS). I select the relevant data that is from four state-owned commercial banks and eleven joint-stock commercial banks between years 2000-2007. First, I use DEA methods to estable the model to measure technical efficiency and scale efficiency. Then, I use the Berger hypothesis estable an equation which can help to test if the five hypotheses can explain the situation of China's banking industry, and then analysis the factors which impact the performance of the banking industry. Through the empirical test, i found the five hypotheses can not fully explain the current situation of China's banking industry. However, to some extent effcient structure hypothesis can explain the current situation of China's banking industry. Market concentration, market share, property rights, technical efficiency and scale efficiency affect the performance to verring degrees. On this basis, I focus on analysis market structure and property rights. In order to facilitate comparison, I divide the sample into two parts: the four state-owned commercial banks as one part, the eleven joint-stock commercial banks as the other part. Through a comprehensive analysis I find market share to a large extent impact the performance of the 11 joint-stock commercial banks and property rights impact the performance of state-owned commercial banks.From the static point of view, the market structure has the characteristics of high Concentration with low efficiency, particularly, the four major state-owned commercial banks is showing a monopoly market characteristics. From the dynamic point of view, the indicators of the four major state-owned commercial banks are declining slowly, and the indicators of the joint-stock commercial banks are rising gradually. This shows that the level of competition is gradually increasing in China's banking industry, which is changing from highly concentrated monopoly market to competition market.Therefore, if the banks want to promote the performance.They must reform the property rights and the market structure.Inside the banking system, they shoud improve the corporate governance structure, estable a unified system of joint-stock commercial banks in general.outside the system, they should relax controls on the accessing into the banking industry, develop private banks ,encourage foreign banks comeing to domestic market, encourage financial innovation, increase the differentiation in products,change separate operation mode gradually to mixed operation mode.In short, by optimizing the structure of the market to improve the competitiveness of banks.