An Empirical Study On The Impact Of Foreign Strategic Investors:Evidence From City Commercial Banks

In December11,2001, China joined the World Trade Organization formally. Then China began to fully fulfill all its commitment to WTO, and phasing out of the geographical restrictions of overseas financial institutions doing business and some other non-prudential. And finally China has implemented national treatment to foreign banks at the end of the transitional period of five years. In this context, foreign banks have accelerated in our strategic layout to share dividends of China’s economic development. In2003, China Banking Regulatory Commission was established. To meet the challenge of WTO, the regulators opened and promote a new round of banking reforms. Under the encourage and promote of regulators, Bank of Communications, China Construction Bank, Bank of China, Industrial and Commercial Bank of China has adopted the way of "injection-financial restructuring-attracting foreign investment-publicly trading" to reform, it become the key part to introduce foreign strategic investors. After foreign capital, asset quality, innovation, profitability and international competitiveness of some state-owned commercial banks has improved significantly, other large joint-stock commercial banks have followed yet. Faced with the competition from foreign banks, state-owned banks and large joint-stock banks, some city commercial banks which grew out of urban credit cooperatives are facing huge enormous pressure to change. For boosting its capital quickly, reducing financial risk, improving risk management capabilities and financial innovation capabilities, some city commercial banks began to extend "olive branch" to foreign strategic investors to seek cooperation with overseas financial institutions, use equity exchange mechanism, technology, management, and hope to elevate the overall strength of the banks in the short term in response to increasingly tough challenges.For introducing foreign strategic investors to promote the reform of China’s banking industry, the domestic circles have been controversial. Some scholars highly appreciate that introducing foreign strategic investors has enriched the bank capital, reduced the non-performing loan ratio, improved risk management capabilities and financial innovation capabilities, and significantly improved the overall competitiveness of banks. Some opponents questioned the necessity of introducing foreign strategic investors, and they believed that it exist the risk of "sale of state-owned equity" and may pose a threat to our country’s financial security, while they are also skeptical to the effect of foreign capital. However, these arguments are mostly revolves around the large state-owned commercial banks and joint-stock commercial banks which related between the national economic lifeline and financial security, and lack the necessary attention to city commercial banks. As the city commercial bank data are quite difficult to get, the research to the effect of its strategy of attracting investment mostly stays at the micro-level of case studies, and lack of overall research and analysis to foreign capital city commercial banks.Based on this basic situation of first strategic foreign capital17city commercial banks at the end of2012, this article conduct a more thorough and systematic analysis to the effect of introducing foreign strategic investors to city commercial banks through combining the methods of normative empirical analysis and using quantitative analysis tools.This thesis is organized as follows:The first chapter of this paper is the introduction which briefly describes the significance of the topic and the background, the structural arrangements and the research methods as well as the innovative and shortcomings of this article.The second chapter defines the concept of city commercial banks and foreign strategic investors, summarizes and summaries some internal and abroad existing literature in financial security, equity prices and foreign capital effects.The third chapter analyzes the background of introducing foreign strategic investors to city commercial banks systematically, analyzes of the current situation to introduce foreign strategic investors and the exhibited characteristics, and on this basis analyzes potential problems of introducing foreign strategic investors to the city commercial banks.The fourth chapter is the end of this article. And it takes a comprehensive study to the effect of introducing foreign strategic investors to city commercial banks on the basis of preliminary normalized analysis in the help of the data to the first time investment which was completed by17city commercial banks of introducing strategic investors. The empirical results show that after the foreign strategic investor becoming shareholder, the capital adequacy ratio of city commercial banks significantly improves, the asset quality significantly improves, and the operating efficiency and profitability also improved significantly, but the changes in business organization and innovation capacity is not significant.Finally, this thesis draws the conclusion of the research and puts forward some political suggestions on this basis.