The Empirical Research On The Impact Of The Ownership Concentration And The Foreign Shares On China’s Commercial Banks’ Risk Taking

With the process of economic globalization continues to advance and the continuous advance of China’s financial reform, more and more private capital and foreign capital into the domestic banking, China’s banking competition has from the previous single domestic capital between competition, change for the state-owned capital, private capital, foreign capital coexist situation, the status of competition in the end of 2006, the financial reform is more obvious.At the same time we can see that in 1995 the Bank of England in Bahrain bankruptcy, the Asian financial crisis in 1997 and the United States in 2008 subprime crisis and other local and global financial crisis often occurs. In the environment of China’s financial industry is the basic open today, the establishment of commercial banks improve corporate governance system to enhance the stability of commercial banks, to resist the impact of the potential risks become banks and regulators in the direction. As the most important financial institution in China, how to prevent and dissolve the risk of the bank will directly affect the security and stability of the entire financial industry, and even the. To risk control of banks, government and external supervision of converting alone to work, the bank must deepen the understanding of the source of risk, from internal equity structure and the level of corporate governance to eliminate and prevent risks.On the one hand, equity concentration and foreign equity participation as the two important aspects of commercial bank equity structure, the part of the property rights of bank governance, and then affect the level of bank risk. On the other hand, the equity concentration degree, stock equity balance level and foreign shares of commercial banks’risk taking effect, will help the company to optimize the ownership structure and corporate governance and to improve the operation and management of the bank.In this paper, we use a total of 32 commercial banks as the observation samples. As of the end of 2013, the total assets of the 32 commercial banks accounted for about 70% of the total assets of the banking sector (including other non commercial banks), to better reflect the level of development of China’s commercial banks. The sample observation period is 2003-2013 years, but the non balance panel data of the sample bank is used in the analysis of the data of the sample bank because of the lack of some bank data or the late time of the individual bank. Through the establishment of random effects model to study the impact of ownership concentration and foreign shares on the risk of China’s commercial banks. From the share proportion of the first largest shareholder, the top five shareholder shareholding ratio and equity balance level to show the ownership concentration of China’s commercial banks, starting from the law of capital adequacy, the non-performing loan ratio and provision coverage to measure the risk of the bank level; in the control of the economic growth rate and the inflation rate of the two macroscopical control variable, the logarithm of total assets, rate of return on total assets and inventory than the three bank control variables later study ownership concentration degree, foreign equity participation and the commercial bank risk between.First, we sort out the existing theoretical and empirical research on the relationship between ownership concentration, foreign equity and commercial bank risk, and provide theoretical guidance for the following empirical analysis. Then we selected the unbalanced panel data were descriptive statistics analysis, in order to roughly see China’s banking industry ownership structure, foreign equity participation status, and lay the foundation for the following empirical analysis. Finally, we through the generalized least square method empirical analysis found that, major shareholder shareholding ratio and commercial bank risk level U type, the presence of the "moral hazard" and "principal-agent" conflict in corporate governance of commercial banks is reduced, non-performing loans and improve the dial by coverage, the top five shareholder shareholding ratio and the optimal range in between 48.2%-54.4%. The five major shareholders and below this level, the corporate governance in the "principal-agent" conflict occupy the dominant position, the management for its performance considerations tend to high risk and high return business activities, and improve the shareholding ratio of the top five shareholders can alleviate the conflict. On the contrary, if the top five holdings of major shareholders is higher than the level, induce a large shareholder of "moral hazard", make commercial banks asset quality decline, business risk increase.To raise equity balance level helps to reduce the rate of bad loans and increase the provision coverage, which means that equity balance level is high, the second to the fifth shareholders for the supervisory role of the first major shareholders more effective, to avoid the "dominance" caused by moral hazard, so as to reduce the level of risk of commercial banks.Foreign equity participation significantly improve assets quality of the commercial banks, and with the equity restriction level, foreign shares positive effect more obvious; with the equity restriction level decreased, foreign equity participation of non-performing loans rate reducing effect is weakened.