The Motive And Effect Of Holding Bank Shares Of Listed Private Enterprises

With the rapid development of China's economy and the improvement of economic system,private-owned enterprises have accumulated a great deal of economic capital and personal wealth,injecting new vitality into China's economic development.In the meanwhile,as the pressure of economic downturn continues to increase,the profitability of China's real economy has been declining,causing the increase of the bad assets of banking sector and the decline of the rate of profit growth.Under the background of the reform of state-owned enterprises and development of mixed ownership economy,the mixed ownership reform in banking industry is also imperative.In recent years,China encourages private enterprise hold shares of banking and also encourages the establishment of private banks.With the relationship between banks and private enterprises is no longer limited to the relationship between creditor and debtor,there has been a boom of listed private enterprises participating banks.But at the same time there are also many private enterprises have exited.This phenomenon brings us to consider the real motivation and effect of holding bank shares of listed private enterprises.On the basis of literature reviews,considering the factors of different stages of economic development of China and through reappearing the representative case of listed privately owned enterprises—Lifan's investment into the Bank of Chongqing,this paper reviewed and analyzed the motivation and effect of holding bank shares of listed private enterprises.First,this paper introduced the background of Lifan company and the Bank of Chongqing,and the detailed process of three stages of Lifan's investment into Bank of Chongqing.Second,based on the economic policies and characteristics of Lifan and Bank of Chongqing,this paper analyzes the specific motives of Lifan's participation in the Bank of Chongqing.Finally,focusing on the financial and accounting data of these two companies,this paper compares the difference of Lifan's earnings,profit growth,investment ability,operation ability and solvency ability between before and after the investment into Bank of Chongqing.This paper also talks about the effect of accepting investment on the Bank of Chongqing's risk control,profitability and governance.Through the research,this paper finds that there are five main motivations of listed private enterprises holding bank shares: promotion of economic policies,establishment of financing platform,seeking of generous short-term returns,diversified management strategies,and considering long-term development.After investing in bank,private enterprise has eased financing constraints and has raised the probability of bank loans getting huge returns through joint-owned banks.However,they have not achieved any significant effect in enhancing the operational capability and solvency ability,and even increased their financial risks.Considering banking situation after accepting private enterprise's shareholdings,the concentration of shares in banks is declining,the capital adequacy ratio has been raised and profitability also has been improved.However,due to the participation of private enterprises with industry characteristics,the bank's concentration of loans is affected,and the disposal capacity of bad loans hasn't been significantly improved.According the study,this paper concludes that the private enterprise hold shares of bank must turn to be normalized in the future.However,the relevant policies and legal norms for this issue are still not perfect currently and it is suggested to improve the relevant laws and regulations.At the same time,private enterprises should make a comprehensive analysis about in the decision of investing into bank or not,which bank they want to invest,and how many shares they can buy from bank considering their actual situation.At last,banks also should consider carefully to choose which private enterprises' investment to accept.