Competition, Efficiency And Shareholder Value Creation

With consideration of the cost of the invested capital, Economic value added (EVA) adjust the traditional financial index and consequently change accounting profit into economic profit. In fact, Economic value added has become the general standard of enterprise performance measurement in the world. So it is very meaningful to mearsure the performance of China’s bank with EVA and introduce it into other analysis.This dissertation calculates shareholder value creation of China’s main commercial banks as their performance measurement with the use of EVA, and calculates H statistics as a measurement of competitive degree with the use of PR model, and introduce them to the analysis framework of structure, competition, efficiency and performance to test theoretical hypothesis. In this dissertation, we also analysis the relationship between shareholder value and efficiency in China banking analysing the value-relevance of a broard range of bank efficiercy measures (namely, pure technical, allocative and scale efficiency). In addition, this dissertation analysis microscopic determinants of shareholders value creation in China’s commercial banks to explore those factors that directly show the situations of bank management so as to provide more useful reference to bank managers. The results show that:1. Full sample banks’shareholder value creation are present a rising trend during the study period; the ascension of the state-owned banks’shareholder value creation is present more obvious, and the state-owned banks show a stronger ability to withstand system risk.2. China banking Sector is oligopoly-type structure with low concentration and oligopoly characteristic continuously reducing; the joint-stock banks and urban commercial banks have a more marked impact on large state-owned banks in loan market compared to savings market in which the joint-stock banks and urban commercial banks’share show a more obvious rising trend.3. Pure technical efficiency best explains variation in value creation; the explanatory of allocative efficiency is relatively limited; scale efficiency makes little contribution to variation in value creation.4. SCP hypothesis, RMP hypothesis, X-efficiency structure hypothesis and scale efficiency structure hypothesis are not fully established in China banking, but partly thinking of SCP hypothesis, RMP hypothesis and X-efficiency structure hypothesis do well in China banking, while scale efficiency structure hypothesis fail completely in China banking.5. China’s commercial bank loans loss provision is in consonance with "skimping hypothesis"; paying employees with higher productivity higher salary is helpful to bank shareholders value creation; small banks centralizing in the more developed region have higher operation efficiency and stronger ability to create value for shareholders; the Chinese government’s strong intervention on the banking sector as well as our people’s full confidence in most banks makes those banks with high leverage can also easily cope with systemic risk and get lower borrowing costs; the development of non-interest income business is good for shareholder value creation.