CAN Commercial Banks’ Corporate Governance Improve The Performance Of Banks?

Commercial banks play an important role in supporting the national economy and thefinancial system work, the bank’s bankruptcy will have a huge impact on macroeconomic.Recently, the frequent occurrence of the financial crisis make people come to realize theimportance of corporate governance of commercial banks. In our particular marketenvironment, character of the banking industry give the corporate governance of commercialbanks new meaning to study the impact on the corporate governance of commercial banks, inorder to help banks to improve the performance of the bank management which means greatsignificance to the bank’s long-term development.In this thesis, many theorists draw results and perspectives through a combination oftheoretical and empirical elaborated impact on the bank’s corporate governance performance.First, explain two basic theories of corporate governance--principal-agent theory andstakeholder theory, then analysis the particularity of commercial banks in corporategovernance combined with characteristics of commercial banks, and further go on with thetheoretical analysis of the various aspects of corporate governance of commercial banksresulted impact on performance, preparing for the empirical analysis.The study sample was selected14listed banks for the sample period2007-2012inaddition to the Agricultural Bank and China Everbright Bank. Commercial bank performanceindicators are chosen from four aspects including profitability, liquidity, safety and innovation.Use the factor analysis to obtain comprehensive performance indicators of the bank. On thebasis of regarding the regulatory as banks’ outside governance, indicators of commercialbanks’ corporate governance are selected into the ownership structure, the board of directorsand supervisory board structure, incentives and regulatory executives four dimensions. Due tothe higher correlation various dimensions of corporate governance index, each dimensionindicators were firstly factor analysis to obtain equity factors to avoid multicollinearity. Thenuse the overall performance as the explanatory variables to construct a random effects model.The impact of different nature on bank performance is more about the the bank’s corporategovernance, I use three different properties of the sample data bank regression models toconstructe comparative empirical results.The empirical results show that concentrated ownership structure of the bank did nothave a significant impact on bank performance, but there are opposite effects on theshareholding structure of the joint-stock banks and state-owned banks on performance.Structural changes of the nature of the bank’s board of directors and the supervisory board ofthe bank were not significantly alter the performance, but the size of the board has a significant negative impact on performance. Executive incentive stimulation had nosignificant effect, the performance of joint-stock banks and local banks may have a positiveassociation and executive incentive, and executives of state-owned banks have a negativeimpact on incentives. Regulatory pressures faced by state-owned banks can hinderperformance significantly which of joint-stock banks can promote bank performance.Multiple regulation does not affect bank performance, but improve the bank’s internalgovernance mechanisms to improve operational efficiency.Finally, combining the characteristics of China’s banking industry and empirical analysis,the following four aspects suggestions are admitted. Improve ownership structure locally,establish a standardized system of directors board of Supervisors for controlling the size ofthe board of directors, establish a long-term and clear incentive and restraint mechanisms andfully play supervision’s role in banks’ risk governance.