Impact Of Stock Price Fluctuation On The Stability Of The Banking System

Since the 80 s of the 20 th century, with the world economic globalization and financial liberalization, countries and regions from all over the world economy is becoming more and more interdependent, the continuous development of information technology and emerging financial innovation promotes the world of asset markets and the development of the financial system increasingly widening and deepening, produced extensive and far-reaching influence you also to all the countries in the world of macro economic operation. The financial crisis in 2008 has brought a huge impact on the world economy, forcing governments and commercial banks to take urgent measures to deal with the financial crisis. But at present our country "s financial system is still in the commercial bank" s system, and the development of the banking system is not perfect, the financial crisis is inevitable and the banking system in our country is closely linked. During the financial crisis is often accompanied by the stock price volatility, during the 2008 financial crisis, China’s Shanghai Composite Index fell from 6124 points to more than 1600 points, to China’s financial market caused a huge impact. Based on this background, the research on the impact of stock price fluctuation on the stability of the banking system and the transmission mechanism, and establish the risk early warning system in line with the national conditions of our country, have important significance to the healthy and long-term development of China’s securities market and banking system.On the basis of previous research results, this paper makes a detailed introduction to the basic theory of bank stability and stock price determination, which lays a theoretical foundation for the following empirical research. And then analyze the operating performance of China’s banking system from three aspects: the quality of assets, the liquidity level and the level of profitability. Then it analyzes the transmission mechanism and channel of the stock price fluctuation. Next, the paper introduces the data source, and describes the research model and method used in this paper, and then analyzes the impact of China’s stock price fluctuation on the stability of the bank by using the data and the empirical model. In the end, the conclusion is drawn, and the countermeasures and suggestions are put forward to safeguard the stability of the bank.This dissertation would use VAR to conduct empirical study of relationship between the stock price from 2002 to 2014 and the bank system stability, which the bank system stability will be taken as research object and the stock price as influence factor, besides the GDP index and CPI index will be considered as control variables. Among them the bank system stability index is built by seven indexes as the weight indicators which are bank credit growth rate(XDZZ), non-performing loan ratio(BLDK), the capital adequacy ratio(ZBCZ), M2(M2), the growth rate of deposit growth rate(CKZZ), loan ratio(CDBL), foreign debt growth rate(WHFZ). According to the bank stability index, the current bank stability is increasing in the fluctuation. After built up the VAR model by using the bank stability index stock price, GOP index and CPI index this dissertation would also use Granger causality test, Impulse response function analysis and variance analysis to discuss the impact of stock price to bank stability from the empirical point of view. The result of the empirical study indicates that the stock price fluctuation bank stability and the bank stability has significant impact with each other.The innovations of this dissertation are as follows. First of all comparing with the study made by previous scholars which are always based on the impact from the capital market changes to the commercial bank, setting up dynamic model to analyze the stock market and commercial bank is more targeted. Secondly, using the bank stability index is more special. As we know the previous scholars are prefer using the empirical data to weight each component index which will bring some subjectivity to the measurement of bank stability. However this dissertation will take good advantage of factor analysis to eliminate the influence of subjectivity which will use composite scores instead to represent the bank stability index. What’s more, the data chosen in this dissertation are all from 2002 to 2014 which is time sensitive.