Empirical Analysison Governance And Credit Risk Of Chinese Rural Credit Cooperatives

Rural credit cooperatives an important part of our financial system and they assume important missions of rural financial resources allocation. By a long period of reform and development, the rural credit cooperatives have been the second important financial organization, which is only inferior to the State-owned banks. Therefore the stability of the rural credit cooperatives has great effects on efficiency and the risk level of financial resource’s allocation in rural and agricultural economy which relates to the stability and prosperity of the whole economy.In the context of the global financial crisis, this paper studied the problems of corporate governance structure and the high risk of the rural credit cooperatives by the corporate governance theory and with the data of rural credit cooperative in Heze city of Shandong province.By our analysis, we find that the ownership structure is relative fuzzy in Chinese rural credit cooperative,"Three Boards" can not fulfill the appropriate governance function and executive incentive is weak. For one thing, this paper makes analysis of formation process of nonperforming loan rate by the case study approach. For the other thing, this article uses an empirical analysis method. With the empirical analysis method, we find that the interior governance mechanism has great effect on the process of the loan rates of rural credit cooperatives. In terms of equity structure, corporate shareholding stake and natural persons shareholding stake are positively related, but not significant, to non-performing loan rate, which demonstrates that they have no effect on the process of non-performing loan rate. But employee shareholding has a significant negative correlation rate with on-performing loans, indicating that with the increase of the employee sharing, on-performing loan ratio will gradually decline in rural credit cooperatives. Executive pay of rural credit cooperatives can motivate executives reduce the level of risk effectively. Board of Directors and supervisory board size are significantly negatively correlated with the the rate of nonperforming loan. Based on the theory and empirical analysis, we propose some policy suggestions on how to improve the corporate governance structure of Chinese rural credit cooperative to reduce credit risk from the Ownership structure, laws and regulations, corporate governance, personnel selection, as well as areas of government intervention perspectives.