A Study On How Corporate Governance Affects TFP Of Rural Commercial Banks

The State Council issued The Solution about Deepening Rural Credit Cooperatives Reform Experimentation in June 2003,to drive the joint-stock system or joint-stock cooperation transformation in eligible rural credit cooperatives,and to promote the perfection of corporate governance structure of rural credit cooperatives as well as conversion of operational mechanism.After the reform of rural credit cooperatives to rural commercial banks,the companies have maintained a good momentum of development.However,in the course of fundamental change of governance mode and great improvement of profitability,rural commercial banks also reveal the deficiencies in corporate governance,such as imperfect organizational structure and unreasonable ownership structure.Governance structure is deemed as the micro-foundation of stability of banking system,and it is of great significance to promote the steady development of rural commercial banks as well as deepen the rural financial reform,by clarifying the inherent mechanism of corporate governance affecting the total factor productivity and excavating the key factors affecting the efficiency of corporate governance in rural commercial banks.This paper studies the impact of corporate governance on the total factor productivity of rural commercial banks.First,based on the relevant theory of corporate governance and total factor productivity,it analyzes the influence mechanism of corporate governance on total factor productivity;Second,it measures the growth of total factor productivity of rural commercial banks by GML index,and analyzes the variation of sample rural commercial banks from general and individual perspectives;Third,selecting indexes from four dimensions of governance situation,ownership structure,capital strength and market space,and it explores the influence of corporate governance on total factor productivity of rural commercial banks by utilizing panel data model.At last,according to the conclusions of mechanism analysis and empirical results,it puts forward some countermeasures and suggestions to improve the total factor productivity of rural commercial banks to improve the corporate governance.According to the mechanism analysis,the corporate governance mainly affects the total factor productivity of rural commercial banks by improving the corporate governance,optimizing the ownership structure,promoting the capital increase and adapting to the market competition.The results of the empirical analysis are consistent with the mechanism analysis.The size of the board of directors,the frequency of the board meeting and the ratio of the private capital have positive effect on the growth of rural commercial banks' total factor productivity,but the equity balance and market share is not conducive to the growth of productivity;the concentration of ownership,the proportion of independent directors and the size of the board of supervisors are not significantly related to the growth of productivity.Based on these results,this paper puts forward relevant countermeasures and suggestions:First,standardize the governance structure as well as improve the checks and balances;Second,promote the flow of shares and moderate concentration;Third,promote the strategic capital cooperation between institutions;Last,cultivate a good external governance environment.