| In 1996,the People’s Bank of China released the Interbank Offered Rate,which laid the foundation for the Interest rate marketization reform.Since then,Chinese interest rate liberalization has been implemented for 23 years.On October 23,2015,the People’s Bank of China announced the cut in interest rates and reserve ratios and the release of deposit interest rates,which marked that Chinese government control of interest rate has been basically liberalized.The reformation has taken a very crucial step,and the interest rate liberalization has entered a new stage.Interest rate marketization is one of the core reforms in Chinese financial sector.As a monetary policy tool,interest rate optimization optimizes resource allocation and promotes the transformation and development of financial institutions,which plays a vital role in reflecting and regulating market supply and demand.The banking plays a vital role in the national economy about financial intermediation.The banking,which has status and role,could be the "neural center" of the country’s economic and financial fields.As a credit intermediary,payment intermediary and institution providing financial services,banks are closely related to our national economic life.In recent years,Chinese banking industry has developed rapidly,and its asset size and after-tax profits have increased year by year.The 2018 World Fortune 500 list,published by Fortune magazine,announced that there are 9 Chinese banks on the 2018 World Fortune 500.In addition,there are four Chinese companies on the top 10 of the 2018 World Top 500 profits,namely Industrial and Commercial Bank of China,Construction Bank of China,Agricultural Bank of China and Bank of China.It can be seen that the stability of the bank is very important to the entire national economy.At the same time,the bank’s stock price reflects the bank’s operating performance and profitability.The stability of the bank’s stock price can also bring confidence to investors and citizens.Therefore,the stability of the bank’s stock price is also crucial to the normal operation of the entire national economy.The relationship between stock price changes and interest rates has always been a hot topic in economics research.Because of the importance of the banking industry,this paper has derived the study of the relationship between interest rates and bank stock prices.Firstly,this paper reviews the relationship between interest rate and stock price,such as discounted cash flow theory,investment substitution effect theory,cost effect theory.Secondly,this paper analyzes the impact mechanism of interest rate on stock price,for example,through borrowing capital,through the willingness of investors and through the proportion of consumption and investment.Thirdly,this paper analyzes the development status,trends of the banking and securities markets.Finally,this paper does empirical analysis about the interest rate on the stock price of the bank and then puts forward some policy recommendations.In the empirical analysis,this paper analyzes the macro and the micro levels and uses the latest data from July 15,2010 to March 29,2019.This paper establishes VAR model,cointegration test,Granger causality test for macro level analysis by using time series datas.On micro level,this paper joins per Control variables such as total equity,Price-Earnings ratio,Earnings Per Share,and uses panel datas to build models for regression analysis.At the end of this paper,some suggestions are proposed about the interest rate and the stock price changes in Chinese banking.For example,to strengthen the government’s supervision of the stock market,to consider comprehensively the trend of market interest rate adjustment and stock trading activities when the government formulates monetary policy,so as to avoid the linkage effect between markets.To romote the process of interest rate liberalization,so that market-based interest rates can increase the impact on the money market and the securities market,so as to play a role in regulating the stock market.To strengthen investors’ awareness of risk prevention and control,so as to avoid lack of Blind investment caused by the understanding of listed companies.To strengthen the banking industry risk prevention system,develop cross-market financial products vigorously,reduce non-performing loan ratios,and improve their operating performance levels,so that the stock prices of banks can be stable. |
