An Research On The Impact Of Regulation On Capital Adequacy Rate To The Valuation Of Commercial Banks In China

If the commercial banks want to run business,they must own some money,and thesemoney are called the capital of the commercial banks,including the money they owned andthe money they can use forever.Only if the commercial banks have adequate capital,thecreditors’ rights can be protected; the commercial banks can run safely;the supervisionstandards can be meeted,the financial system can be in stable development,then theregulatory institution on banks and the commercial banks can promote each other. As thecommercial banks are very important for the economic system and its specificcharacters,the regulation on capital adequacy rate can avoid systemic bank crisis,make thebanking system and economic system develop smoothly.After each financial crisis,the capital adequacy supervision will get better,especiallyafter the subprime crisis of the USA in2008,《The Basel Ⅲ》made on September12th,improve the regulatory on capital adequacy ratio, and add multiple regulatory indexfor regulation on capital adequacy rate. From 《Commercial Bank capital adequacy ratemanagement method》made in2004, our capital adequacy supervision has made CAR forcore. In August,2011, new capital adequacy supervision was issued and it will certainlyinfluence the commercial banks.The commercial banks are enterprises, so the valuemaximization is naterally their goal. So which kind of effect will the regulation on CARmake to the commercial banks, will it control risk, reduce loss? How will commercialbanks react to find a balance? So the research on the impact of Regulation on capitaladequacy rate to the valuation of Commercial Bank in China will have deep meaning forthe regulation on banks and the management of commercial banks.As the research on the impact of regulation on capital adequacy rate to the valuationof commercial bank in China will give a good explain for the policy, the scholars all overthe world have done many research, but they don’t make an agreement.Some think, theregulation on CAR will have an positive effect, but others say, it will make negative effect.This article elaborate how did the regulation on CAR develop, how will the new regulatorystandards influence our commercial banks. Then make the theory analysis for the influenceof the regulation on CAR to the commercial banks. At last, the empirical research. Andthey means a lot to the regulation and the commercial banks.In the overall, the article is divided into five chapters, as follows:Chapter one is the introduction. First, this section introduces the background and the significance of the research.In order to adapt to the international banking regulatorytrend,our regulation institution on banks issued new standards. And this will inevitablyinfluence the commercial banks in China. The commercial banks must study hard to find abalance between value maximization and complying with the regulatory standards. Thenthis section describe the reviews of literatures, including the positive theory and thenegative ones. The last part describes the main research content, the basic structure and theinnovation.Chapter two is the theory analysis. First, this section describes the regulation oncapital adequacy rate and the valuation of commercial banks. Secondly, this section makeanalysis of how does the regulation on capital adequacy rate influence the valuation ofcommercial banks. Thirdly, this section describes the two impacts of the regulation oncapital adequacy rate to the valuation of commercial banks.Chapter three is the analysis of the development of the regulation on CAR. First, thissection introduces the development of the regulation on CAR. Secondly, this sectionanalyzes how will the new regulatory standard influence the commercial banks, combiningwith how is the CAR of the commercial banks.Chapter four is the empirical analysis. The results indicate the model is effective, andthe CAR is negatively related to the value of the commercial banks. Besides, the leverageratio has strong connection with the value of the commercial banks, which is the proof forthe new regulatory standards.Chapter five is the policy suggestions. For the commercial banks, there are foursuggestions. They are improve capital management, enhance CAR; improve assetsmanagement; perfect risk management; work with the regulatory institution on banks forbetter future. For the regulatory institution on banks, there are also four suggestions. Theyare changing the regulatory idea; changing the way of supervision; make central bank andself-regulatory organiztions work more.The innovations of this article are as follows:1.Most of the study on the effectiveness of the regulation on CAR focus on theregulation can reduce risk. This article learned from the former researches, sum up theeffects, and elaborate the way of the requlation on CAR to the commercial banks from thispoint of view.2.At the empirical methods, this article make the superexogeneity of the CAR, andmake the control causality of CAR and valuation of commercial banks. 3.The regulatory institution on banks add leverage ratio for the regulation on CAR,but there is not empirical reaearch. This article make leverage ratio as static CAR, and useit, CAR and valuation of commercial bank for the grey relation analysis.