Impact Of Commercial Bank Equity Structure On Credit Risk

Commercial bank as an important part of our financial system, its sound development plays a very important role to the development of China’s economic and the improvement of financial efficiency. With the rapid development of financial globalization, bank risk rising. Asian financial crisis, U.S. financial crisis, European sovereign debt crisis and Cyprus crisis and so on a series of crises out broke, which exposed the vulnerability of the banking system. People realized that efficient sound governance system, reasonable equity structure, good risk controlling is extremely urgent and important for the commercial banks. Commercial bank faces a variety of risks, credit risk is the most important and the most complex, therefore controlling the credit risk is especially important for commercial banks.Equity structure from the perspective of corporate governance decides the governance mechanism of commercial banks and the behavior choice, thereby affect their business performance and risk. Based on the necessity of the credit risk controlling and the vulnerability of the banking system, we will research the credit risk of commercial banks from the perspective of equity structure.This paper takes China’s 16 listed commercial banks annual data during 2000-2013, choosing the ratio of the largest shareholder, the proportion of the top ten shareholders, the state-owned property of controlling shareholder, the proportion of state-owned shares, the proportion of legal shares and the proportion of the tradable shares to measure equity structure, using the NPL ratio to measure credit risk, using unbalanced panel data model, to do an empirical analysis of the relationship between the equity structure and credit risk of China’s listed commercial banks. The results show that:the ratio of the largest shareholder, the proportion of state-owned shares and the proportion of the tradable shares are significant positively correlated to credit risk; the proportion of the top ten shareholders, equity restriction and the proportion of legal shares are negatively correlated to credit risk; the state-owned property of controlling shareholder has little impact on credit risk. Based on these empirical results, in view of the status quo of the equity structure and credit risk, this paper proposes policy recommendations to improve the ability to control credit risk by optimizing the shareholding structure.