A Research On How Foreign Strategic Investors Affect The Efficiency Of State-holding Commercial Banks Of China

State-holding commercial banks play an important role in the financial sector of ourcountry. On the one hand, they would face the pressure of foreign banks after five yearsof China entering WTO; on the other hand they had to meet the challenge of joint-stockbanks who was more flexible and more innovative than State-holding commercial banks.What’s more, they also had motivation to development themselves. Since2004, fourstate-holding commercial banks had signed strategic investment agreements with foreignfinancial institutions. To ensure the entering of strategic investors have a good effect onChina’s banking, the China Banking Regulatory Commission promulgated the "fivestandards" and "five principles" to regulate the behavior of introducing foreign strategicinvestors. After the introduction of foreign strategic investors, the discussion aboutwhether they can improve the operational efficiency of State-holding banks or not hasbeen continued. After2008, many foreign strategic investors began to sell the share ofstate-holding commercial bank of China,the reason was that in the financial crisis theyhas serious financial problem and maybe there were speculative motive in theirmanagement. So far, some foreign strategic investors, such as Goldman sachs group inc.,is no longer the shareholder of the state-holding bank of China. Selling gave people moreunderstanding of foreign strategic investors, and there are more and more doubts aboutthem. Therefore, in this article, we discuss the change of operational efficiency, then westudy the effect of foreign strategic investors to operational efficiency.This paper defines foreign strategic investors and operational efficiency firstly.And analyzes how overseas strategic investment impacts the operational efficiency ofbanks. We find that foreign strategic investors do not improve operational efficiencydirectly. Management mechanism and banking skills have been improved by two parts,operational efficiency begin to change. Secondly, this paper plays an attention to thecondition of introducing foreign strategic investors and studies strategic cooperationwhich has appeared. Though they are all State-holding commercial banks, their mainbusinesses are different, so as the proportion of shareholding.These characteristics canpartly explain selling behavior after lock-up period. What’s more, the article madeempirical analysis with DEA to discuss the effect of operational efficiency impacted by foreign strategic investors. Then according to mechanism of action that foreign strategicinvestors make effect on operational efficiency, empirical analysis is done. At last, thispaper makes some suggestions on problems in the process of introduction foreignstrategic investors.The result of empirical analysis is that the introduction of foreign strategic investorscannot improve operational efficiency obviously. At the same time, we notice theoperation of ABC who doesn’t sign a strategic investment agreement with foreignfinancial institution is efficient. This suggests that domestic institutions are more maturethan before. In future development, state-holding banks can compare the advantage ofdomestic institutions and foreign institutions to choose the appropriate partners.