Research On The Impact Of Hua Xia Bank's Capital Structure On Its Profitability

Profitability can reflect the competitiveness of banks.Good profitability is beneficial to the development of banks.However,affected by the constant adjustment of economic structure,financial disintermediation and interest rate tightening,the profitability of commercial banks has also been affected.What's more,with the 2013 Capital Adequacy Regulations and the New Rules issued in 2018,the capital of commercial banks has been more strictly supervised.Under such a background,Huaxia Bank has insufficient profitability and is behind other joint-stock banks.Therefore,how to adjust and optimize its capital structure to improve profitability has certain practical significance for the future development of Huaxia Bank.Based on the classical and modern capital structure theory,this paper will analyze how Huaxia Bank's capital structure affects its profitability with combination of normative and empirical analysis.First of all,by selecting Huaxia Bank's 2003-2017 data and using the principal component analysis,this paper solves the problem of multicollinearity between independent variables and control variable.Secondly,taking the two principal components return on dependent variable which called total assets.In the end,according to the relationship between original independent variables,control variable and standard variables,restores the two principal components,So a regression equation between the original independent variables,control variable and dependent variable which called total asset has been formed.The results of this research shows that capital structure of Huaxia Bank is relatively unreasonable and needs further adjustment and optimization.Among them,the shareholding ratio of the first largest shareholder,the shareholding ratio of the top five shareholders,the proportion of the subsidiary capital have a positive impact on profitability,but the asset liability ratio,the deposit to debt ratio and the capital adequacy ratio has a negative impact on profitability.Therefore,this paper proposes some advice: establish a stable and concentrated shareholding structure,control the ratio of assets to liabilities,enrich the debt structure,increase the proportion of subsidiary capital,and change the way to promote capital adequacy ratio.