The Performance Evaluation On Listed Banks Based On Factor Analysis

Stock market is the link between debtors and investors. As the rapid development of the economy and the enhancement of our investors’ awareness on investment, people in mounting numbers have paid more attention to the stock market, and even have got into the market themselves to invest on stocks. However, profit always comes with risks. In order to get profits and avoid risks maximally, investors have to have a good command of relevant knowledge and skills. Among these knowledge and skills, the ability of evaluating the performance of listed companies is indispensable.Listed companies have the responsibility to publicize their financial statements at regular intervals. However, due to the fact that these statements contain too many sophisticated indexes, it is very hard for ordinary investors to effectively analyze the performance of listed companies under the background that they do not have the required expertise. For the purpose of solving this problem, now the industry has come up with several simplified methods, such as Composite Grade Method. Composite Grade Method takes the average level among industry as its standard, providing several grades through the comparison between companies’ financial indexes and standard indexes. Then, it gives different weight on different indexes and results in a comprehensive grade. Finally, investors can judge a company’s conprehensive performance according to the comprehensive grade. Obviously, this method is very simple and easy, but to some extent, the selection of indexes and the determination of weight are subjective, resulting that the conclusion given by the performance evaluation is inaccurate.Considering the condition above, under the background of Composite Grade Method, this article tries to give a comprehensive judge of listed companies through using Factor Analysis to give weight on different financial indexes objectively. Factor Analysis is a method with fair objectivity. Its determination on weight for each index is based on the analysis of original data. Then, it simplifies various indexes to a few irrelevant comprehensive factors, achieving the ends of dimension reduction and reducing the superimposition among indexes. Owing to this feature, it compensates the traditional Composite Grade Method to a great extent.Up until now, there are16commercial banks have been listed in China. Listed commercial banks have become an important part of security market in our country. This article will take these16listed banks as an example, carries out a performance evaluation on these listed banks based on Factor Analysis. As to the selection of financial indexes, based on CAMEL Model, this article chose capital situation, asset quality, management level, profit situation and asset liquidity as five sources to choose target indexes. Different from previous models which have been used on the analysis of listed banks, considering the financial situation these years, the level of safety has become increasingly significant for banking industry. So we chose Capital Adequacy Ratio and Core Capital Adequacy Ratio as analytical indexes to establish the judging index system, hoping to reflect the performance evaluation of commercial banks more comprehensively.At last, using relevant data of the16listed banks and the method we discussed above, this article carries out a performance evaluation on these banks and comes up with a comprehensive judgment on their performances, which is specifically explained at the end.