Research On The Relationship Between Capital Adequacy Ratio And Operating Performance Of Listed Commercial Banks In China

As all we know, commercial bank is the special enterprise which operates currencyand is always being high debt. Capital is the foundation of its management and theguarantee of operation, so commercial banks can also be seen as the enterprise whosemajor is capital and risk management. As a measure of commercial bank capitaladequacy, capital adequacy ratio is also one of these criteria to discriminate the abilityof risk tolerance. Operating performance is the only goal of commercial banks and thekey factors which can reflect the current competition strength and the future sustainabledevelopment ability. It had become the important financial policy tool to constraintbank management behavior. Hence, the research between capital adequacy ratio and theperformance of commercial bank has very crucial significance.Implemention of Basel Accord designated the birth of the unified capital standardsin the international bank section in1988. The introduction of the “New Basel CapitalAccord” in2004made a lot of revision and supplement on “the Basel Accord”. But withthe increasingly more rapidly economic globalization and financial internationalization,the innovation of financial products changing quickly, Banking tends to be diversifiedand complicated, financial markets are deregulating, commercial banks are expandingquickly. All these brought about a world-class crisis. The outbreak of the financial crisisin2008sounded the alarm for regulatory and gave birth to the “Basel III”. Compared tothe regulatory agreement, this new standard paid more attention to the quality of capitaland the ability of prevention of cyclical risk. Due to institutional reasons, commercialbank in our country didn’t attach importance to the problem of capital adequacy in thepast, its capital structure and was not reasonable for a long time. In recent years, ascommercial banks listed one after another, capital adequacy ratio has also been greatlyimproved. Thus many issues still remain unresolved. Facing new regulatoryrequirements, commercial banks should be how to adjust the capital asset, could theyreach the Basel III standard and achieve the steady improvement in its operatingperformance. The solution to this problem has now become the top priority of thecommercial banks and regulatory agencies. In this view, we choose to study therelationship between capital adequacy and performance of china’s commercial bank andgive some suggestion for improving the structure of capital. I hope that the work I have done in this dissertation will devote my weak strength to the enhancement of capitalmanagement and the performance of commercial banks in china.This paper is organized as follows Firstly it summarized several literatures aboutthe capital structure and capital adequacy regulation’s impact on the performance oflisted commercial banks. Then it found that there is no consensus about this issueworldwide. Secondly, based on the summary of the theory on the capital adequacy ratioof commercial banks and operating performance, we analysis the mechanism of actionabout the capital adequacy and performance. Thirdly, a situation stepwise analysis ofcapital adequacy and performance of China’s listed commercial banks was doneaccording to the publicly disclosed information of recently years. It also get the dataready to the following empirical research. Finally, selected quarterly data of the listedcommercial banks in the past five years and by used of principal component analysissuccessfully built a comprehensive performance evaluation of listed commercial banks.Then this paper constructed of regression model which as Performance Indicator to bedependent variable, as the capital adequacy of the relevant indicators to be independentvariables. The empirical results show that listed commercial banks’ capital adequacyratio, core capital adequacy ratio and operating performance has a significant positiverelevant relationship, but Supplementary capital adequacy ratio is unrelated. Stake of thelargest shareholder shareholder’s nature and asset size also positively correlated withoperating performance. It suggested that Capital structure, governance structure, andother factors also had an impact on business performance. According to the results ofempirical analysis, we found an appropriate increase in the capital adequacy ratio (corecapital adequacy ratio) and optimization of the capital structure is conducive to thegrowth of the operating performance of commercial banks.