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An Empirical Research On The Impact Of Foreign Equity Participation On Bank Performance

Posted on:2010-04-06Degree:MasterType:Thesis
Country:ChinaCandidate:T ZhuFull Text:PDF
GTID:2249330374495355Subject:Accounting
Abstract/Summary:PDF Full Text Request
With the deepening reform of China’s financial system and the progressing of the reform-and-open policy, the environment of our commercial banks is constantly changing. But facing with the varying financial pattern, our commercial banks still have many problems in the fields of bank governance, management philosophy, and organizational structure. Seeing from the countries’experience horizontally and the historical reference vertically, introducing foreign capital is the essential component of one country’s bank internationalization. A large number of studies show that foreign equity participation can bring advanced concepts of risk-preventing ideas and banking management, which is an important external propulsive force for our banks’adjustment of the ownership structure and the improvement of the corporate governance structure, and hence making the introduction of foreign equity participation a new wave of our banks’reform. But recently the study of the impact of foreign equity participation on the bank performance has just started, and is not sufficiently comprehensive and well developed. Besides, the special status of our banks in the national economy leads to cautious attitudes of our government towards the ownership structure reform and the restrictions of the investors’eligibility criteria and the equity ratio. Therefore, this thesis focuses on our commercial banks and tries to explore the impact of foreign equity participation on the bank performance under recent regulatory environment, in order to provide a theoretical basis for the government’s policy.In the first part of the concept definitions of the study subject, the writer points that considering our state-owned banks’specialty and the subjectivity of the definitions between foreign strategic investor and financial investor, this thesis takes all the commercial banks with foreign equity participation except the state-owned banks for the sample and follows the concept of foreign equity participation, in order to more objectively reflect the problem which this thesis wants to cover. Next this thesis combines related theories of corporate governance and international direct investment, and shows that foreign equity participation can promote the diversification of the bank’s ownership structure, improve the corporate governance structure, and affects its operating philosophy and business technology through demonstration and training-flowing effect, which hence improving the bank’s performance.To exactly explore the relationship between foreign equity participation and bank performance, this thesis uses dummy variables to represent whether foreign equity participation exists, and studies its influence on bank performance. The empirical results show that foreign equity participation can significantly improve the bank performance. Based on this conclusion, the writer specifies the characteristics of the foreign equity participation referred to related regulations from four aspects such as foreign director, the lower and upper ratio limits of foreign equity, and the holding period, and investigates the impacts of these characteristics on the bank performance respectively. The result indicates that the proportion of foreign directors is negatively correlated with the bank performance; the holding period is positively correlated with it; the number of the foreign investors with more than5%of total outstanding shares can significantly influence the bank performance; the impact of the proportion of foreign ownership on the bank performance is not remarkable. The writer believes that there may be conflicts between Chinese and Western culture, business philosophy, and acceptance and so on, making the effect of foreign directors appears till a run-in period, and the improvement of the bank performance caused by the holding period also confirms this to some extent. In addition, the ceiling set for the share-holding ratio of the foreign investors may weaken the bank performance improvement caused by foreign equity participation. Based on the above findings and analysis, the writer puts forward some policy recommendations for the references of the government and relevant organizations.
Keywords/Search Tags:foreign equity participation, bank performance, foreign director, share-holding ratio, holding period
PDF Full Text Request
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