The Impact Of Ownership On The Prudential Behavior Of Banks

The ownership means the owner’s rights to lawfully possess, utilize, profit from and dispose of his property. The ownership is a typical kind of property rights, it was also be called property ownership. Prudential behavior means that the commercial banks should comply with prudential operating principle for the purpose of standardize bank behavior. In Banking Supervision Law of the People’s Republic of China, the law provisions that the prudential operating principle includes:risk management, connected transaction, liquidity of assets, capital adequacy ratio, loan loss reserves, internal control, loan concentration risk, asset quality. While risk management is the most important principle. As a special enterprise which engaged in monetary capital, the business activities of the bank itself means that the existence of the risk, in order to effectively prevent and respond to the risks, promote the rapid development of the bank, so the most fundamental solution is to regulate banks’own behavior that ensure prudent management. Analysis the impact of ownership on the prudential behavior of banks is not only conducive to the rapid and healthy development of the bank. At the same time, it is also beneficial to China’s banking supervision department has targeted to carry out supervision work to protect investors. Protect the investors, depositors or other creditors’legitimate rights are not infringed.In the background of China’s banking reform, this paper use bank ownership as the breakthrough point in order to analysis the impact of ownership on the prudential behavior of banks. Firstly, in order to separate different types of bank ownership, this article divides the sample banks into two kinds banks, one kind is four state-owned commercial banksthe other kind is include thirteen joint-stock commercial bank and fifty-one city commercial bank. Secondly, this paper selects five indicators (loan assets ratio, loan-deposit ratio, loan growth rate and asset growth rates, bad assets ratio) which was used to measure bank’s risk preference degree to study the impact of ownership on the prudential behavior of banks. In the regression analysis, this article use measurement analysis software STATA to research whole sample bank and subsample bank.Based on regression analysis, we found that:there are large differences in the prudence of operational behaviors between the state-owned banks, policy bank, joint-stock banks and city commercial banks. That is to say, the joint-stock banks and city commercial banks are more prudent than state-owned banks and policy banks. When we analyze how other factors affect the prudential behavior of banks, we found that the variable’s (listed dummy, bank asset, bank age, deposit/loan, the gdp growth rate) influence of bank prudential behavior was not significant in most of the regression results. However, there are few exceptions which have conflicting conclusions in statistics. This suggests that the influencing factor of bank prudential behavior are very complex. In the analysis of state-owned banks sub-sample, the result show that this paper does not support the view that with the deepening of reform, state-owned banks will become increasingly cautious.