Empirical Research On The Relationship Between Corporate Governance And The Performance Of Commercial Banks In China

Finance is the core of modern economy, and Banking industry is the most important part of the finance industry. From 90s in last century, Chinese government has started its banking reform. One of the key features of the reform is to establish a throughout cooperative govern structure for state-owned banks. Since in 2002 entering WTO, finance industry in China gradually open up. Since 2004, Chinese government has conducted a series of reforms for commercial banks, including bettering share-holding structure, introducing in strategic investor, pushing forward the public listing. Till now, the competence layout has been formed, where state owned banks, joint-stock commercial banks, local commercial banks and foreign banks co-exist. Studies on the relation between the Chinese state-owned commercial banks' performance and its governance structure are thus very meaningful. Any constructive result will be very advisable for enhancing the competence of state owned banks.Based on pervious theoretical works on cooperate governance, this paper uses data of 14 commercial banks to estimate the effect of share holding structure, board characteristics and senior executive incentives on the performance and governance structure of cooperation. The performance is characterized by ORE and NPL. The results shows that government shares in state owned banks and its net return to capital is clearly non-linearly correlated, and the relationship between it and bad loans is not clear. The concentration level of shares is significantly correlated with net return and bad loans. Board characteristics is negatively correlated with net return, but non-linearly correlated with bad loans. The existence of balance institution among big share holders does not correlate with net return, but is significantly negatively correlated with bad loans. Independent share holder and shares of senior executives holding have the similar effects. The correlation between senior executive wage and net return is significantly positive, bur its correlation with bad loans is not clear. This paper is divided into 6 chapters as follows,Chapter 1 is the introduction for the research background, impact, research methods, innovation and extensions.Chapter 2 summarize the theoretical proofs for the cooperate governance. This chapter started from brief definitions, then conclude the major features of the cooperate governance and its relationship with the performance. In the end, the particularity of its implication in banking industries has been discussed.Chapter 3 introduces the implication of govanance in China commercial banks. This chapter started from the peculiarity in commercial banks, then summarize the situations and problems of the cooperate governance in the current China banking industry.Chapter 4 introduces the theoretical models and assumptions on the relationship between the cooperate governance and performance. The assumptions are constructed from eight perspectives, and then the regression models are thus erected.Chapter 5 shows the regression results. Description statistics first describe the mixed panel data of the 14 listed firms. Then regression method is used to estimate the correlations. The final outcome gives some suggestions to the relationships between cooperate governance and performance.Chapter 6 includes extensions and discussions. According to the conclusions in the last chapter, suggestions have been given to better the governance structure.The novelty of this paper is the adoption of relatively new panel data. However, the main problem is that the sample size is relatively small, and the reliance of the data of the listed firms. These may be the causes of some contradiction to the prediction of the theory in the empirical result.