The Empirical Research Of The Board Characteristics And Performance Of City Commercial Banks

In2011, City commercial banks in China has entered a period of unprecedented extraordinary development.At the same time, City commercial banks produced a lot of reform and transformation in the process of development and formed its own core competitiveness.The CBRC report pointed out that the city commercial banks employing233.238people and having a total of144institutions, which accounts for3.8%of the total number of banking financial institutions. So researching the City commercial banks is imperative. Because the City commercial banks have impact on the development of our China’s financial and economic. China’s economic development level and identity as well as the diversity of the financial needs determine the City commercial banks important position in the regional economic development. Practice has proved that the City commercial banks have provided financial support for the urban economic development. The majority of our City commercial banks are held by the local government, which is the essential characteristic of the City commercial banks. Because of the particularity of our City commercial banks, it is becoming the third echelon to rapid development and growth.The Board of Directors at the hub position in the company’s organizational structure, its operation good or bad directly related to the level of quality of the efficiency of corporate governance and corporate management. In the Board of Directors governance process producing positive impact and directing role is the structural features of the Board of Directors. Board Characteristics is the quantitative description of the architecture of the board of directors.According to the research of scholars at home and abroad, as well as to consider the availability of data, select the following Board Characteristics.(1)The size of the board:mainly refers to the total number of the internal of the directors of the bank’s, including chairman, vice chairman, directors, independent directors.(2)the proportion of independent directors:mainly refers to the percentage of the number of independent directors in the total number of the Board. Independent directors is independent shareholders of the Company, not internal company serving, not contacting important or professional business and making independent judgments for the affairs of the company.(3)the unity or separation of the position of the chairman and general manager:The unity is about that the Chairman or the Vice Chairman also served as the Governor of the Bank. The unity will affect the independence of the board and executive level innovation capacity.(4)The number of meetings of the Board of Directors:mainly refers to the number of meetings held by the Board of Directors annual report. The number of meetings of the Board can reflect the implementation and decision-making ability of the Board.(5)The number of the sub-committee of the Board:The sub-committee include the Audit Committee, the Strategic investment Committee, Remuneration Committee, Nomination Committee, Risk Control Committee, Evaluation Commission and other special committees.(6)The average age of members of the Board:mainly refers to the average of the sum of the actual age of all the members of the Board of Directors in the annual report. Through studying the age can learn in which the average age of directors can impact on performance positively. Though studying the board characteristics can learn the relationship between the Board Governance and Bank Performance.Based on the particularity of the city commercial banks in the process of China’s economic development, as well as the importance to bank performance, it is very important to study the relationship between the Board Governance and city commercial banks operating performance. Requirements according to the China Banking Regulatory Commission, city commercial banks should establish the disclosure system of information from2006. Considering the integrity and availability of the data, this paper use the city commercial banks annual report data from2007to2011as the research samples. Empirical test the relationship between the characteristic variables of Board and Bank Performance. The characteristics variables include city commercial bank’s board size, the proportion of independent directors, unity or separation of the chairman and general manager, the number of meetings of the Board, the number of sub-committee of the Board and other characteristic variables. Bank performance measure is from the point of view of both market and accounting, respectively, that is, the rat of return on total assets and earning per share. Empirical analysis method is using Stata/SE11.0software to regression analysis the model. Through data statistics, summary, screening process, retained the157banks in the sample data. Study results show that the Board of scale was significantly negative with bank performance ROA at the10%level and non-significant negative with EPS. The proportion of independent directors was ignificantly positive with bank performance ROA at the5%level and non-significant positive correlation relationship with EPS. Chairman and president of the city commercial banks unity was significant positively with the bank performance ROA, and irrelevant with EPS. Sub-committee of the Board of Directors was significant negative with EPS, and irrelevant with ROA. The numberi of meetings of the Board was no correlation with the bank performance. The average age of menmbers of the Board was significant negative with ROA,and no relevant with EPS.Through the research of Board Governance of city commercial banks and Performance of the bank, we can get the improvements suggestions:Such as the reasonable control of the number of board size, improve and perfect the system of independent directors, the chairman and general manager be divided, strengthen the sub-Committee of the Board setting, improve the efficiency and quality of the number of meetings of the Board, pay attention to the positive role of the members of the young directors, standardize and improve the information disclosure system of city commercial banks, to promote the performance improvement of China’s city commercial banks.