Evidence On The Structure And The Performance In The Baning Industry

With the financial industry opening-up to the outside world,Chinese financial industry faces unprecedented challenges.Despite the vigorous development,which undergoing the market structural change of improving the level of competition,Chinese banking industry is still in the low performance compared to the foreign banks. It is an undisputed fact.By the end of2006,Chinese banking sector have come into the World Trade Organization.The local commercial banks faces more highly competition,with the foreign-funded banks in China have the national treatment. It is very important for Chinese banking to enhance its performance and competitiveness.so that study of the relationship between the structure and the performance in Chinese banking is also urgency.Many domestic and foreign scholars have engaged in the relationship between the performance and the market structure and have formed the classical Structure-Conduct-Performance (SCP) analytical framework.The scholars have carry out the theoretical and empirical analysis and formed the two main overwhelming hypotheses-the hypothesis of the market forces and efficiency structure hypothesis.On the basis of these previous researches.This paper will use the data of China’s major commercial banks from1997to2007,which are on behalf of Chinese banking industry,to have an empirical study,in order to draw on the research results-which is valid in Chinese banking industry,the "market forces hypothesis" or "efficient structure hypothesis.Furthermore.according to the latest Chinese Committee on Banking Supervision, this paper will also distinguish the types of samples,in order to make a specific analysis on the relationship between the market structure and the performance in the different types of banks.This paper analyzed the relationship between the market structure and the market performance in the banking industry by using a random-effects model.By the Hausman test,this paper used the random effect model.The study found that in Chinaese banking industry,wether the market-power hypothesis or the efficient-structure hypothesis is not established.The impact of efficiency is a key factor which has significant impact on the bank performance, but efficiency can not brought about the expansion of the banking market share, so the hypothesis of market forces and effective structure hypothesis is not set up in Chinese banking industry. However, among the joint-stock commercial banks.which grown up under the conditions of market-based economy, the efficient-structure hypothesis is established.Finally, this paper put forward to enhance the performance of China’s banking industry policy recommendations.