Foreign Banks Entering Research Relationship With Our Country Commercial Bank Risk-taking

Since China entered WTO, with the overall opening up of China’s banking industry, rapidly development in our economy, and China’s continuous development of comprehensive national strength, foreign banks have fastened their steps to mainland. With the intensifying of competition and further relaxation of interest rate controls, the interest rate spreads of China’s banking industry, and may result in an average profit margin down. Therefore, the coexistence of China’s banking industry opportunities and adjustments, it brings opportunities but also risk. In April2007, China cancels the regional and customer restrictions of running RMB business to foreign banks in China. The entering of foreign banks will have a competitive effect, and it also is able to bring some negative affects such as increase the banking regulative and controlling difficulty and bring some impact to domestic banks. It needs our country to pay a certain cost.To a certain extent, the entrance of foreign banks may affect the domestic bank franchise value, and bring more intense competition in the industry, which will result in the host country banks face an unfavorable situation such a profit decline, increased risk and so on. The vulnerability of the banking system increased, franchise value of banks to reduce is an important factor of bank fragility, high franchise value of banks can reduce the excessive risk-taking behaviour.In this paper, based on the franchise value perspective to analyse the relationship of the entrance of foreign banks and the franchise value of China’s commercial banking, using a combination of theory and empirical methods, first by summarizing the literature review of domestic and overseas’s scholars.Analyzing the definition of franchise value, and compared the measurement method of franchise value, with a theoretical analysis of the entrance of foreign and the binding effect of franchise value, and then analyzes the relationship of the franchise value and risk-taking banks of China’s commercial banking, and found that the variation trend of one-year deposit-loan spreads in China has the same direction with the franchise value of China’s commercial banking. Finally, by the use of the empirical analysis select the16listed banks as samples, and select the interval of1999-2010annual data, by using Tobin’s Q method measured the franchise value selected sample banks. By building sixteen banks of panel data, using EVIEWS6.0for the fixed effects model analysis, By building panel data of16banks, using EVIEWS6.0for the fixed effects model analysis. Construct two stages least square method to model, and then analyze the relationship of franchise value and bank risk-taking.Finally, according to regression results, to make policy recommendations about how to deal with bank risk, how to improve the bank franchise value, and how to regulate the entrance of foreign bank.