The Effects In Corporate Governance When Bank As A Creditor

In recent years, the marketization of commercial banks in china has made great progress, while external constraint of bank credit markets to the debtor's business increases significantly. However, even though the non-performing loan ratio of banks has been basically reduced to the safety level, the bank's operational risks are still relatively high with banks being large creditors of listed companies and imperfect corporate governance, which is not conducive to the smooth progress of the reform of banks. As a result, financial risk control of banks shall be of great importance and urgency especially when sub-prime mortgage crisis occurred in the States and spread to the whole world in 2008 is considered.With theories on corporate governance and the creditor governance effect of capital structure, according to the debt management effect of banks, this paper researches the effect of corporate governance of public companies which owe money to banks, such as effect of control, effect of equity structure, effect of agency cost and free cash flow. The paper introduces motivation theory, signal transmission theory, contingent governance theory, and dominant of banks as creditors in the elaboration of the basic theory. This paper, on the base of theory analysis, empirically studies public companies of Guangdong province in china from 2004 to 2008, refining bank claims and researching debts which public companies owe to banks, company performances,agency cost and free cash flow with regression analysis. It is shown that there is a negative correlation between the level of bank debt financing of Guangdong public companies and company performances, a negative correlation between companies short-term loans and long-term loans and company performances, thus bank credit fails to promote company performances. It is also shown that there is positive correlation between bank credit and agency cost in the regression analysis of the benefit of agency cost, as a result,there is no effect of bank credit to reduce agency cost. There is the same situation in the field of free cash flow.At the end of this article we will begin with analyzing the current satiation and the reasons for Bank corporate governance of listed corporate, to reshape the relationship between banks and enterprises, we will put forward suggestions about strengthening the contingent governance functions, establishing the effective debt security system, allowing banks to have the strategic shareholding and to standardize and improve organized banking system, improving the information disclosure system, enhancing the incentive and restraint mechanisms of managers , establishing a market-based supervision and management system, further improving the bankruptcy system.