A Study On Private Capital Stakes Promote Performance Of The Local Commercial Bank

In recent years,the Chinese government introduced a number of policies to encourage and support private capital investing in the banking in an appropriate way.The greater regulatory effectiveness and looser policy have stimulated the investment enthusiasm of the private capital.By taking stake in local commercial banks,not only the private capital realized the expansion of investment channels,operational performance of the local commercial banks can also be promoted.Since its inception,each local commercial bank is in strong competitions.In addition to relying on local development and their own advantages,introducing strategic investors could be a good way for local commercial banks to improve performance.The main purpose of this paper is to study the influence of the private capital investment on operational performance of the local commercial banks.Firstly,reference to a reasonable performance evaluation system,operational performance of the local commercial banks would be analyzed,compared with other commercial banks.Secondly,the study analyzed the performance before and after the private capital stake local commercial banks to get a general conclusion about the effect of this behavior on operational performance.Thirdly,there would be an empirical analysis about the association between the ownership structure and the operational performance of the local commercial banks.Finally,according to the results of empirical analysis,the paper proposed policy recommendations about how to guide the private capital stake local commercial banks from three different perspectives.The following conclusions could be made through this study: first of all,local commercial banks have made significant progress in reorganization and reform,though there still are some defects of their management.Compared with other commercial banks,local commercial banks have enough competitiveness in business growth,asset quality and solvency,but the profitability remains to be improved.Second,the investment activity of private capital could be of great importance to local commercial banks.By changing the ownership structure,which is a result of the private capital investment activity,local commercial banks would improve their running abilities,especially in business growth and risk management.Third,the results of the empirical analysis show that there is an inverted U-shaped relation between operational performance and the share ratio the first largest shareholder holds.The correlation between operational performance and proportion of the top ten shareholders is not significant.And proportion of the private capital holdings has positive effects on performance.Fourth,private capital,local commercial banks and the government should take positive view of private capital stake in local commercial banks.