Joint-stock Reform Of Rural Credit Cooperatives Based On Small Bank Advantage

According to"stabilize county"policy from the CBRC, corporate level in Rural Credit Cooperatives (including rural cooperative banks) isn't better for higher, and we should keep Rural Credit Cooperatives unified legal within the county (city). Therefore, Rural Credit Cooperatives will finally become small rural commercial banks after joint-stock reform. A number of foreign studies have shown that small banks'efficiency often is higher than big banks', and having their business orientation called"comparative advantage of small banks"(the"Small Bank Advantage"). The survival and development of small banks is on the basis of the formation and exertion of the advantage, but small bank advantages don't form naturally and need a number of internal and external conditions. Therefore, in order to make Rural Credit Cooperatives become small sustainable development rural commercial banks, joint-stock reform should begin according to small bank advantage. This determines that the joint-stock reform of rural credit cooperatives and joint-stock reform of the way large and medium sized banks are not the same. In addition, the different initial conditions also determine the differences between rural credit cooperatives and medium-sized banks.This text has main points as follows: (1) relatively to large banks, small banks have a comparative advantage on relationship lending to small enterprises. But to own comparative advantage on small enterprises'relationship lending, small banks must have an advantage on control the cost of principal-agent. Actually, Small banks have the advantages on control principal-agent problems as three aspects including organizational structure advantage, location advantage and ownership structure advantage. At the same time, there are also external factors that are market competition conditions, external supervision, judicial environment and social environment influencing the performance of small bank advantage. (2) By analyzing the advantages of rural credit cooperatives in China according to the formation mechanism of small bank advantage, we found that farmers'small amount loans developed by rural credit cooperatives have characteristics of relationship lending. And owning the advantages of the original factors and special design, rural credit cooperatives have the advantages on issuing farmers'small amount loans. However, because of the asymmetry between the benefits and risks form the defects of ownership structure and corporate governance, this advantage can't fully play. (3) Significant defects in the ownership structure from fragmented ownership structure, defects of structure and geographical factors from the distort management system, and a huge amount of bad assets that the rural credit cooperatives have, are the reasons that the advantages can not fully play. (4) In order to make rural credit cooperatives fully form and play their strengths, the key issue is reform of property rights. What's more, we proposed proper management mode, competitive market structure, and reasonable role of local government recommendations.