China's Joint-stock Commercial Bank Valuation Model Choice

Corporate valuation is the sort of economic methods of evaluating the market value of enterprise and its inner units. Both corporate valuation and asset appraisal are based on modern property right system and have similar valuation models. However, corporate valuation emphasizes on the expected value while asset appraisal attaches importance to the present value. The valuation theory derives from capital budgeting methods. Heretofore, there are a great deal of valua on models, including Relative value ratio, discounted cash flow valuation, B-S model, etc. Different models have their particularity and applicability.Fama's Efficient Market Hypothesis emphasizes on information efficiency in capital market. The level of efficiency has close relation with the rationality of asset pricing. In efficient market. corporate value solely rests on investment decision and operating cash flow. Under present accounting frame, the principles of history cost and responsibility accounting have great limitation. The concept of cash flow and present value has become so important that vakiution models based on cash flow would become prevalent.According to the positive study of some scholars, China capital market is lack of efficiency. The ubiquitous phenomena of high P/E ratio and account manipulating lead to the application of different valuation models. Those problems result from specific share structure, imperfect corporative structure, and excessive government intervention, etc.Compared with Common Corporation, commercial bank has explicit particularities. Commercial bank is some kind of risk-operating enterprise, which has high level of debt ratio and operates currency on the basis of credit. Bank industry has great centrality and demonstrates the characteristics of imperfect competition. With China's entry into WTO, great changes would be taken place in competitive circumstances. Furthermore, macroeconomic and juristic circumstances have close relation with commercial bank.Consequently, the specialty of asset structure in commercial bank has unfavorable effect on the application of cost models. The small quantity of "comparative company" in rhina's capital market and market bubble weaken the reliability of market ratio approaches. When it comes to the discounted cash flow models, the prediction of capital cost of commercial bank is complicated, which results in the conclusion that the discounted value model of free cash flow of equity is the optimized selection presently.