Our Country Banking Market Structure On The Influence Of The Performance

While it’s easy of access to China’s banking market, the quantity of banking financial institutions become more and more and the pressure of competition gets more and more big. By the end of2010, there are3769financial institutions, including5large commercial banks,12joint-stock commercial banks,147city commercial banks,2646rural credit cooperatives,40foreign financial institutions and so on. A competitive market structure has been formed with the completion of property rights reform and the promotion of China interest rates liberalization reform. It is meaningful to study the changes of market structure of China’s current banking industry which would affect bank’s industry.This paper, based on the SCP analysis framework, analyzes the banking market structure on the influence of the performance. And the content is divided into three parts:The first part introduces the theories related to market structure and performance. The article first introduces the basic theory of structure and performance, including the Harvard School, the Chicago School and the new industrial organization theory. The paper also introduced three hypotheses as the main contents of the SCP analysis framework and correction theory. Then the banking industry research literature at home and abroad, based on SCP analysis framework, were reviewed in this paper.The second part analyzes the current situation of China’s banking industry market structure and performance.In this part the market structure, market share, market concentration and entry barriers are discussed. With the analysis of market share of bank deposit, loan and asset, it shows that the market share of large commercial banks except bank of communications are declining, while the rising tide of joint-stock and city commercial banks, which make the large commercial banks face greater competitive pressure. Secondly, the article points out that China’s banking market concentration is very high, four large commercial banks has a major position in the banking industry, and our country banking industry belongs to the oligarchs type market structure. Again, this paper, from the barriers to entry aspects of China’s banking industry, points out that the barriers to entry for the banking industry is the administrative barriers and economic barriers. Finally, this article analyzes our country banking particularity of the market structure. The paper argues that the high concentration of China’s banking industry and large bank high market shares come from the accumulation of the past economic system and is the results of the administrative market forces.Then the article analyzes the current situation of performance of commercial banks in China from the profitability, liquidity and safety. It points out that in the SCP analysis framework scholars are based on profitability of the commercial banks to conduct the performance measurement. In the commercial bank profitability, large commercial banks and joint-stock commercial banks’ return on assets is increasing, and large commercial bank cost efficiency in ascension. In liquidity, the deposit-loan ratio index of joint stock commercial banks in China was significantly higher than the large commercial bank and the city commercial banks. In safety, our country commercial bank bad loans decreased significantly recently and the capital adequacy ratio increased year by year according with the banking regulatory requirements.In the third part, the paper makes an empirical analysis on the influence of China’s banking market structure to the performance and explained why. First of all, the paper points out that in empirical analysis BERGER model is used. Then, the paper states the data and variable selection:data from2006-2010each listed commercial bank annual report and the banking regulatory commission report, explained variables being the return on assets and market share (MS) and assets of the absolute concentration index (CR4) as the explaining variables. Meanwhile, the cost-income (CIR) is a variable as a rough estimate of the efficiency and bad assets (NPL) is the control variable. Then, in the paper regression analysis were conduct by Eviews5.1, using the panel data of16listed bank. It showed that market shares and concentration coefficients are not significant, and that market concentration changes in opposite directions with bank performance. It is concluded that traditional collusion hypothesis and relative market forces hypotheses is not established in our country. That is to say, market structure of China’s banking industry does not influence the bank profits.In the end the paper tries to find out the reasons why China’s banking market structure does not affect the performance based on market hypothesis theory. And it finds out that the homogeneity of China’s banks does not form the relative market power. It’s important to note that the bank homogeneity includes the product homogeneity, the market positioning homogeneity and the target customer homogeneity. The bank is hard to create its own comparative advantage for the homogeneity and tends to conduct intense price competition. The existence of bank homogeneity results the problem that banks can’t influence customer preferences to their products and then can not impact the performance of the bank. So the Relative Market Power Hypothesis is not established in our country. In the state of homogenization, internal and external competition pressures force the large commercial banks not to develop monopoly price, and also China’s large commercial banks are faced with the dilemma of prisoner, so there is no collusive possibility. The Traditional Collusion Hypothesis in our country is not established, and large commercial banks can’t make monopoly prices to gain more profit by market power. So market structure cannot directly influence the performance of banking industry in China.