The Study Of Measuring And Preventing Reputational Losses In Chinese Commercial Banks

Chinese banking industry is under the circumstance of economic restructuring, which leads to a fierce competition. The competition lies on not only services but the value of brand. As an enterprise of operating risks, a bank needs the ability of risk management. As an important part of modern commercial bank regulation of risk, there is a considerable concern over the reputation risk management in recent years. Reputation risk plays an important role in banks’ survive and development. Therefore, the quantification of reputation risk is indispensible. Based upon the study of both abroad and domestic, the paper analyzed the cause of reputation risk from internal as well as external causes. Putting forward a method of measuring accumulated abnormal returns, the paper quantified reputation risk, which provides a new way of thinking of reputation risk management for Chinese commercial banks.To begin with, the paper analyzed the causes of reputational losses in commercial banks in terms of internal causes and external causes, providing theory evidence for the quantification of reputational losses. Based on event study, the paper brought out an approach quantifying reputational losses in commercial banks by means of the cumulative abnormal return. In empirical analysis, the paper used 137 reputation events( lost more than 10 million or caused severe negative evaluation) of 16 Chinese quoted commercial banks(ABC, China Everbright Bank and Ping An Bank based on their own listing dates)as samples, researching contributions of reputation events in different types. Divided into state-owned banks, city commercial banks and other commercial banks, the difference of them is supposed to appear. The paper found that 5 state-owned banks suffered most in terms of reputational losses, followed by 8 other commercial banks. By comparison, 3 city commercial banks suffered reputational losses least. At last, the paper provided countermeasures and suggestions from the perspectives of internal causes and external causes.