The Research On Profit Model And Leverage-adding Strategy Of Domestic Brokers

As a key component of financial system, securities companies havebeen playing a very important role in the capital financing process of theentire economy. Compared with the long history of foreign securityindustry, China’s modern securities industry only goes through severaldecades of development. Though the industry has witnessed a significantdevelopment and is in the ascendant, it has long been criticized for itsunitary profit-making model, highly reliance on stock marketperformance, and weakness of risk management. As the opening up ofdomestic financial industry, competition from not only domestic banks,trust companies, but also from foreign financial institutions has pusheddomestic brokers to the cross road to change, or to be out of the game.The main research works of this dissertation can be generalized intofive parts as follow:First of all, in the introduction, the thesis analyses the researchobjectives and significance, explains the research methodology,framework of the thesis. Secondly, the thesis review the research works have been done up tonow globally and domestically.Thirdly, the thesis introduce the history of Chinese securitiesindustry, analyses the business model of domestic brokers, and points outthe problem embedded in current profit model, so as to emphasis theurgency of changing the profit model.Fourthly, the thesis picks the leverage as a point of view to discussthe restructuring of business model of domestic brokers. From this pointof view, the thesis first discusses the relation between profitability andleverage of a company, both theoretically and empirically. And then thediscussion comes to the leverage-adding strategy of domestic brokers,both from the views of liability supply side and the capital utilizationside.Lastly, the thesis also provides suggestions to securities regulatorand domestic brokers, in terms of the risk management issue related tothe leverage-adding activities.