An Empirical Study On The Influence Of The Proportion Of Local Government Ownership On The City Commercial Banks Business Performance

Finance is the pillar of national economic development. With the development of market economy, small and medium-sized enterprises play an important role in national economy. In order to serve local economy and small&medium-sized enterprises, City Commercial Banks was set up through merging city credit cooperatives under the arrangement of local government.In the end of 2015, the number of City Commercial Bank in China reached 144, which assets reached to 21.20 trillion yuan. City Commercial Banks has becoming the third echelon in Chinese banking system, which make up the insufficient banking services. Due to the "government dependency", City Commercial Banks are under the interference of government. Do government ownership affect the business performance of City Commercial Banks? People pay much more attention to this problem. This paper, on the basis of relevant literature, combining stakeholder theory, the principal-agent theory and asymmetric information theory, intend to strengthen the management of City Commercial Banks and provide a theoretical reference to improve business performance.Based on economics and management theories, this paper illustrate the problems of City Commercial Banks through reviewing its history. We analyze the influencing factors and mechanisms of City Commercial Banks business performance and Government Ownership. Based on these analyses, we make four assumptions around the relationship between government shareholding ration and business performance of City Commercial Banks. We choose mixed OLS model for empirical analysis, with data from 2010 to 2014. The research find:(1) Local government ownership and business performance negatively correlated;(2) Local government shareholding ratio and loan concentration positively correlated;(3) High&low local government shareholding ratio and business performance adversely related;(4) Moderate local government shareholding can enhance business performance of City Commercial Banks. Based on above, we suggest keep the ratio of local government shareholding, improve the equity balance degree, accept high quality investment, reduce loan concentration to benefit SMEs.