A Study On The Industry-Finance Integration Of City Commercial Banks

The Industry-Finance integration, which is realized by close link of debt and equity participation, is a new relationship between industrial and financial sectors in China at a certain stage of economy development, and it can effectively help eliminating information asymmetry, reducing transaction costs, improving the competitiveness of both sectors as well as optimizing the allocation of resources.Compared with traditional pattern of Industry-Finance integration, the modern pattern not only have motivation of control and profit maximization, but also have needs for expansion, dispersed ownership and risk aversion. From the perspective of city commercial banks, the issue of inadequate capital is the primary constraints for their further development. City commercial banks usually have limited channels to raise capitals since most of them are unlisted, as a result, they prefer to raise funds from their shareholders. However, the scale of the capital that banks need is too massive to be satisfied by general corporate, then some large enterprises become the important targets for these city commercial banks to collect capitals. This strategy of some city commercial banks that set large-scale enterprises as their key financing resources could not only provide these banks continued and sufficient funds from large shareholders but also is beneficial to their rapid expansion of markets, customers channels regarding the related business of the major shareholders. Thus, this financing strategy of Industry-Finance integration becomes an important model for future development of city commercial banks in China.First of all, this paper reviews the theory concerning the Industry-Finance integration as well as domestic and international related literatures. In the second part, the motivation and the positive and negative effects of the integration are analyzed from the perspective of transaction costs and asymmetric information theory. Then, Bank of Kunlun is selected as the case of this research of the Industry-Finance integration model applied by city commercial banks which have targeting large shareholders. This section includes the analysis of the basic information of Bank of Kunlun, the comparison of its situations before and after the integration, the reasons of this bank to take the integration, the positive and negative effect of this integration and the discussion that how to further improve the Industry-Finance integration. Based on the case of Kunlun Bank, the last section of the study concludes that there are three stages of modern Industry-Finance integration with targeting large shareholders:at the first stage, the city commercial banks attract the capital injection from large-scale industry enterprise and change their management structure through the Joint-stock reform; at the second stage, these banks take advantages of the resources of large shareholders to get rapid expansion of the market, customers and channels; at the final stage, with the development of the socialist market economy, bilateral integration can be achieved by the way that city commercial banks and industry firms mutually hold equities.To sum up, this paper takes the Kunlun Bank as the research object, with financial theory, combining the comparison of its situations before and after the integration, after analyzing the Kunlun Banks with melting of reason and the resulting economic benefit, and to explore the city commercial banks with melting and motivation mechanism, efficiency and risk, hope to promote the city commercial banks how to further improve the Industry-Finance integration, and provide theoretical support and practical guidance.