The Impact Of Market Structure On The Business Performance Of Chinese Commercial Banks

Commercial bank is an important component of Chinese financial market, and is becoming more and more useful in the process of Chinese economic development. Because of the financial system strictly controlled for a long time, the banking industry of our country has formed a market structure in which state-owned commercial banks highly monopoly the market but in low efficiency, while the development of non-state-owned commercial banks are limited. With the financial deregulation and the deepening of interest rate liberalization, commercial banks have many development opportunities. How to optimize the market structure of Chinese commercial banks to improve business performance is becoming an important issue.In this paper, under the guidance of the theory of SCP analysis paradigm, we discussed the impact of market structure on the business performance with the specific data of Chinese commercial banks. Firstly, we introduced the generation and development of industry organization theory and the basic theory of market structure, enterprise behavior and performance. Then, we selected the data of 17 commercial banks from 2007 to 2014, chose the net fixed assets, number of employees, operating expenses as input indicators, net interest income and non-interest income as output indicators, and then measured the efficiency of all the commercial banks with the help of DEA model. The results shows that the efficiency of Chinese commercial banks is in a rising trend from 2007 to 2014, and the efficiency of the non-state-owned commercial banks are higher than the state-owned commercial banks. Finally, we did the panel data regression analysis, using the rate of return on assets as the dependent variable, and market share, market concentration, technical efficiency, scale efficiency as independent variables. The regression results shows that the market power hypothesis applies to Chinese banking industry, while the traditional collusion hypothesis and the efficient structure hypothesis do not apply to Chinese banking industry. Through the contrastive analysis of the state-owned commercial banks and non-state-owned commercial banks, we found that the indistinctively negative correlation between market share and return on assets for state-owned commercial banks and the distinctively positive correlation between market share and return on assets for non-state-owned commercial banks. And the reason why the relative market power hypothesis is applicable to our country may be the interest rates liberalization in our country. In this case, commercial banks begin to pay attention to the differentiation of product, customer orientation and market orientation in order to improve the business performance.Finally, we put forward the suggestions. Based on the interest rates liberalization, accelerate the reform of interest rates in order to achieve the real interest rate liberalization. At the same time, commercial banks should focus on the development of intermediary business, the promotion of product differentiation, and accelerating the financial innovation. State-owned commercial banks should pay attention to improve the operational efficiency, and non-state-owned commercial banks should try to expand the market share while maintaining high operating efficiency. Reduce market concentration, and improve the performance of the commercial banks constantly.