Analysis Of The Comprehensive Operation's Impact On The Profitability Of Chinese Commercial Banks

Since 1998,China has undergone a decades of exploring process on comprehensive management.The revised Commercial Bank Law in 2013 clarified the rights of investing from China's commercial banks into non-bank financial institutions.Meanwhile,commercial banks have made a huge leap on the pilot work of equity investment since 2005.In 2011,the 12thFive-yearplan of China further proposed the policy of "actively and steadily push forward the pilot sector operation".It emphasized that qualified financial institutions are supposed to be guided through integrated operations pilot to prevent the risk,manage comprehensively and steadily so as to improve the comprehensive financial services capabilities.The publication of this policy supported the integrated business model in banking sector in terms of national policy.From 2007 to 2013,with the permission of the state regulatory authorities,commercial banks gradually began to engage in trusts,insurances,securities and financial leasing business.Since then,the comprehensive management of China's banking industry is beginning..Since 2012,China's economic situation has changed and the domestic economic growth rate slowed down significantly.Under this circumstance,the interest rate marketization in our country accelerated apparently.From 2011 to the present,China has basically liberalized the lower limit of the commercial bank loan interest rate and the upper limit of deposit interest rate,which announced that the completion of the interest rate marketization is basically finished.Those days that China's banks rely on high interest margins to earn profits were gone,coming along with banking service homogenization and the brutal competition within this industry which continues to compress the profit margins.At the same time,the continuous improvement of China's capital market's direct financing system and the sudden emergence of Internet finance have created an unprecedented impact to China's banking industry for the first time.Under such background,China's commercial banks need to change urgently.Reforming the profit model,adjusting the income structure and accelerating the pace of comprehensive management have become an important issue to commercial banks.On the basis of predecessors' research,this paper introduces the exploration and development of China's commercial banks in the past decade,and summarizes the situation of comprehensive development of commercial banks in recent years.In addition,from the perspective of comprehensive operation,this paperchooses the indicators to measure the degree of comprehensive operation and uses the panel data model to test the profitability data relationship between the sixteen listed commercial banks in China from 2008-2015,and considers the commercial bank loan to deposit ratio and non-performing loan ratio in the same time as control variables within the model.By the final empirical test,we find that the comprehensive management of 16 listed commercial banks did not enhance the overall profitability positively,but showed a significant negative correlation.Then we re-divided the samples,selected the Industrial and Commercial Bank of China,Agricultural Bank of China,China Construction Bank and Bank of China of which the asset sizes are much higher than the other 12 listed commercial banks as samples to do a further regression analysis.The results show that the integrated operation has promoted the profitability of large commercial banks which avail to the relatively large assets banks to raise their profitability.On the contrary,we carry out a further regression analysis of the other 12 listed commercial banks,and the results show that the consolidated operation did not improve the profitability of the smaller asset commercial banks,instead they were negatively affected by the profitability of growth.Therefore,commercial banks should not pursue comprehensive operation blindly.Integrated operation is not suitable for all commercial banks,and its impact on the profitability of commercial banks vary from their own assets.Large commercial banks can rely on their scale,scope,synergies and brand effects brought by their large scale of assets,which can fully carry out the comprehensive operation to improve their overall profitability.The relatively small commercial banks should seek their own advantages,and explore innovative business areas to enhance the competitiveness.The first part introduces the background and significance of this topic,and summarizes the relevant literature combing the ideas and logic of the research.On this basis,this paper describes the research methods and structure,then present the innovative points and deficiencies.In the second part,the concept of profitability and comprehensive operation of commercial banks are defined,and the concepts of comprehensive operation and profitability are introduced.And the theoretical basis of comprehensive operation is expounded.The third part analyzes the influence mechanism of the comprehensive operation of Chinese commercial banks on profitability.At the same time,it is also the qualitative analysis part of this article,which introduced the commercial banks to conduct integrated business reasons through the interest rate marketization,financial disintermediation and national economic transformation.Then,we summarize the status quo of the comprehensive operation of commercial banks in China from the three aspects of policy process,laws and regulations and development status.Finally,it analyzes the mechanism of the integrated operation of commercial banks on profitability.The fourth part is the empirical analysis about the impact of the comprehensive operation of Chinese listed commercial banks on profitability.Based on the data of 16 semi-annual reports of listed commercial banks from 2008 to 2015,the panel data model was constructed and the fixed effect model was used to carry on the regression analysis.The fifth part concludes the study,and gives the policy suggestion according to the final result of empirical analysis.And then it puts forward the relevant recommendations about comprehensive management and policy recommendations about its supervision for different sizes and types of banks in China from different angles.The innovation of this paper is the impletation of the latest banking data since 2012,carrying on the empirical analysis by assets as sample standard.It overcomes the lag of domestic literature data and the lack of empirical studies.Due to limited knowledge and objective conditions,this paer does not perfect the number of data samples and the theoretical analysis.I will take this as an opportunity to make up in the future work.