Study On The Influence Of Foreign Equity Participation On The Risk Of Commercial Banks In China

Since the reform and openness, in order to adapt to the situation of the development of the world economy, China began to actively explore the road of financial development, constantly open up financial markets, and strong reform of institutional mechanisms for the financial industry. Among them, reform of the banking industry made great achievements, significantly improved the quality of assets, capital adequacy ratio and profitability significantly enhanced, new institutions and new business also emerge in endlessly. The prosperity and development of the financial market, the innovation of financial system, financial instruments and financial products, has brought a lot of opportunities and challenges for the development of China's commercial banks. China's commercial banks need to make major adjustments to deal with the fierce market competition in the financing,payment and risk management. In order to meet the development needs of the real economy, but also in order to better align with the international, China's commercial banks chose to transfer ownership. The way of attracting foreign investment in the form of equity financing is the inevitable trend of the development of domestic banks.Therefore, in order to conform to the historical trend of reform and opening up,China's commercial banks set out to introduce foreign equity, which open up a new path for the development of China's banking industry.However, during the financial crisis, in the view of foreign selling Chinese funded bank shares, the influence of foreign equity participation in China's banking industry is benefit or harm caused widespread controversy, the domestic scholars expand on this research, the results of the study show that, foreign equity participation has an effect on the risk of commercial banks, but due to the difference of research region and research methods, scholars research results are different. Combing the relevant literature, this paper found that on the one hand, most current domestic scholars research on influence of foreign equity participation of the profitability of commercial banks, but in addition to the pursuit of profit, commercial banks seek to ensure safety; on the other hand, the bank risk metrics selection is one-sided, and mainly based on static level inspection. So this paper selects ruin probability ZROA as the proxy variable of bank risk, and studies the influence of foreign shares on the riskof commercial banks in China by using the GIF-GMM estimation method.On the basis of combing the domestic and foreign relevant research, this paper comprehensively examines the impact of foreign investment on the risk of commercial banks from the theoretical and empirical point of view. Effect of channel of foreign equity in China's commercial bank risk mainly has the following: control effect, financial effect, learning effect, the effect of supervision. First, foreign equity have an effect on ownership structure and poses a restriction on the shareholders' rights to use, ultimately affect the risk of commercial banks; secondly, the introduction of foreign capital is a kind of financing behavior, which broaden the sources of capital for commercial bank, and contribute to prevention and resolution of bank risk; thirdly, commercial banks have learnt advanced management mode and management technology from foreign shareholders, which is conducive to enhance their risk management level; finally, the proportion of foreign equity participation is relatively high for commercial banks to form effective supervision, to reduce the risk of the bank, if the proportion of foreign equity participation is weak, or interests of foreign shareholders and other shareholders are inconsistent, effective supervision can't form, that is not conducive to commercial bank risk prevention and control. On the analysis of the influence mechanism between the foreign equity participation and the commercial bank risk, combined with the risk of Commercial Bank of China,situation of foreign shares, regression model was established by 2008- 2014 China 17 banks of panel data, and then conduct an empirical test. The results show that foreign shares will reduce Commercial Bank risk.Based on empirical results,in order to reduce the risk of China's commercial bank, this paper recommends commercial banks appropriately transfer equity and increase the proportion of foreign ownership shares within the specified range.Foreign shareholders improved the level of risk management of China's commercial banks is encouraged to introduce. Supervision department need to optimize investment policy and strengthen supervision on foreign capital.