A Study On The Impact Of Capital Structure On The Performance Of China's Joint-stock Commercial Bank

Financial globalization is an important part of economic globalization and an inevitable development. Compared to trade globalization and transnational production, financial globalization is the most dynamic economic factor to economic globalization. According to the framework of WTO agreements, at the end of 2006 the full liberalization of China's banking industry, the total elimination of foreign banks to conduct RMB business in the geographic and client restrictions. China's all-round competition in the banking sector and foreign banks has since launched. Meanwhile, the minimum capital requirements, external supervision and market discipline as the three pillars of Basel II implementation of the framework is also imminent. Regulation of China's capital has become more stringent constraints. In the current situation, to build a rational, scientific and efficient capital structure of commercial bank governance mechanisms have a significant role to the sustained development of China's banking industry and even the whole national economy stable and healthy development.According to China Banking Regulatory Commission's definition of joint-stock commercial banks, this paper has carried out the study on the impact of capital structure on the performance of China's joint-stock commercial bank. The main content of this paper is in the following:The first chapter reviews the theoretical and empirical researches on the relationship between capital structure and corporate governance and explains relevant concept.The second chapter is the analysis of the mechanism of the impact of the capital structure on the performance of the bank from both the ownership structure and debt structure.The third chapter describes the status of the ownership structure and debt structure of China's joint-stock commercial bank. By analyzing seven joint-stock commercial banks'2009 Annual Report, we found the following characteristics of the ownership structure of joint-stock commercial banks:First, the diversification of ownership; second, the forms of state-controlled is various; third, the connection of the major shareholders is strong. The status of the debt structure of the joint-stock commercial banks is in the following:deposits are still the main source of debt capital; the ratio of the bonds payable to total liabilities is low; lack of innovative financial liabilities.The fourth chapter is the empirical analysis of the impact of the capital structure on the performance of the joint-stock commercial bank. From the perspective of the availability of data, we selected the Shenzhen Development Bank, SPD Bank, Huaxia Bank, China Minsheng Banking Corp., China Merchants Bank, Industrial Bank and CITIC Bank 2003-2009's semi-annual data for the study sample. Select the ROE as a measure of bank governance performance indicators. Explanatory variables are divided into two categories, one is a measure of equity ownership concentration and the nature of the variables, use the largest proportion of shareholding, the proportion of top ten shareholders as a measure of ownership concentration index, choose the proportion of state-owned shares, the proportion of corporate shares, the proportion of tradable shares as a measure of the nature of equity index. The other is a measure of the debt structure of joint-stock commercial, that is, the proportion of bonds payable. In order to control other features of the governance performance of banks, we selected the bank size as control variables. As the data is a group of mixed cross-sectional data, so we selected year as dummy variables. In order to avoid the problem of multicollinearity, we will set up 6 models to analysis the relation of every explanatory variable and the explained variable respectively. We will obtain the empirical results and then give a reasonable interpretation.The fifth chapter is conclusions and some advices. Conclusions of this paper are as follows:First, China's joint-stock commercial bank ownership structure does impact on the governance performance, the impacts are as follows:there is a significant negative correlation between the proportion of the largest shareholder performance and the performance of the bank; there is significantly negative correlation between the proportion of top ten shareholders and the performance of the bank; state-owned shares and the bank's governance performance was negatively related. Second, in the empirical analysis of the impact of the debt structure on the performance of the joint-stock commercial bank, there is no significant linear relationship between the ratio of bonds payable and the governance performance. In the author's view, it is all because of the imperfect of China's capital market; third, bank size and bank governance performance is significantly positively correlated. Based on the theoretical analysis and empirical research, the paper provides some suggestions on optimizing the capital structure and improving performance of the China's joint-stock commercial bank. That is to maintain an appropriate level of ownership concentration, reduction of state-owned shares, to cultivate the rational institutional investor, to issues subordinated debt, to develop innovative hybrid capital instruments and to improve the capital market.