An Empirical Analysis On Factors Affecting Commercial Rate Floating Amount

This article attempts to study empirically the Chinese banks’lending behavior and its trends in China’s Banking Reform. With financial data collected from the public listing companies in China’s stock market from1999to2010, this research takes the strategy to infer banks’lending behavior from firms’debt financing.Each loan is seen as one sample in this paper regardless of its time and borrower. We focus on the explanatory power of micro-factors on the overflow or discount of bank lending rates over benchmark interest rates. The advantage of choosing spreads instead of the actual lending rates as my independent variables is to exclude the macro-factors and concentrate on part of the rate that banks can actually decide. For further research, variables representing time, policy-loan banks, industry, tax and state-owned commercial banks are gradually added to the original model leading to a comprehensive assessment of lending behavior of the Chinese banks. We will also see how these factors change through banking reforms.Our results show that the fluctuation over benchmark interest rates decided by commercial banks within their authorities is mainly influenced by types of loans, potential mortgage rate, undistributed profit rate and growth rate of the company. The default rate of the company and loan amount are never relevant. Second, there exists a structural change on banks’lending behavior in2007. Third, the setting up of policy-loan banks in1994does shoulder the burdens of providing ’policy loans’, as there is a remarkable difference between policy-loan banks’ lending behavior and the commercials’during our sample period. Fourth, the lending behavior of state-owned banks itself is different in2007. Before2007, state-owned banks only took undistributed profit rate into account as they priced their loans. After2007, the pricing decision is however more prudent. What’s more, after2007the pricing decision becomes similar between state-owned banks and joint-stock banks. At last, this article finds that Chinese banks have a systemic lending bias in favor of stated -owned enterprises or government supporting industries. This suggests that government’s implicit guarantees influence banks ’lending decisions.The results may cast some light on the further reform of banking system. First, we need to enhance banks’ ability on risk management. Second, quantitative indicators should be the main factors in computing lending rate instead of subjective judgment. Last but not the least, the emphasis of state-owned banks’ reform is to enhance the supervision of banking systems not commercialization.