A Study On Evaluation Of The Risk-taking Of Commercial Bank And Its Correlation Effect

The financial crisis which frequently burst recently indicate that the poormanagement for risk taking of commercial banks could lead to the bankruptcy of thecommercial banks, or even lead to instability of financial markets and economicrecessions. Recently, the domestic commercial bank develops quickly, but the hiddenrisk exists with the financial and economic condition becoming complex. Under thisbackground, it is meaningful to study the risk-taking and its correlation effects ofcommercial banks. On the basis of the financial enterprise management theory,corporate governance theory and econometrics, this dissertation studies the risk-takingand its correlation effects and the countermeasures.Firstly, the risk-taking of commercial banks and the correlation effects istheoretically analyzed. Based on the clarifying the notion of risk-taking and itscorrelation effect and describing the external external manifestation of the risk-taking,the influencing factors of risk taking, such as the operation condition of commercialbanks, coporate governance, market condition and the macroeconomic condition, isanalyzed, and the reasons that cause the correlation of commercial banks’ risk taking isalso analyzed from the aspects of the financial fragility, monetarism, and informationcontagion.Secondly, the commercial banks’ risk taking level is evaluated based on thefinancial information. Using the bad loan ratio, capital adequency ratio, and Z index, acomprehensive model to evaluate the risk taking is constructed by applying the greycorrelation methods. The model can reflect different types of the financial information,and it is able to evaluate the commercial banks’ risk taking overally. Judging by theempirical result, the risk taking is relatively high, and the volatility of joint-equity statedowned commercial banks is lower than others. Meanwhile, the results from thecomprehensive model is simar to the result of the Z index and capital adequency ratio,this empirical results suggest that the commercial banks’ risk taking is influced by thecoverage ability that is based on the profit and risk reserve can cover the operationalrisk.Thirdly, the risk taking of the commercial banks is evaluated based on the marketinformation. To overcome the limation of the financial information, the risk taking ofcommercial banks is evaluated by using the financial information, such as the asset value under the KMV framework. The result shows that the mean and the variance ofcommercial banks’ assets have multi-structural breaks. And the structural KMV modelcan accurately describe the changes of the commercial banks, and the result reflects themarket expection, and it is proved forward-looking.Fourthly, On the basis of commercial bank risks’ taking factors model, the effectivecomponent and ineffective component are decomposed. The empirical result based onthe panel data model shows that the lagged risk taking of one period, total assets of thenatural logarithm, the stock held by the board of supervisors and top managers, depositto total asset ratio, GDP growth ratio, and real estate industry index are the mostsignificant factors that influence the risk taking of commercial banks. Then, thehypothesis that the influencing factors obey the normal distribution is given up, and theKolmogorov-Smirnov test is applied to test the distribution of influencing factors.Based on the distribution test and the Monte Carlo simulation, the expected risk takingof commercial bank is calculated by the lagged risk and the influencing factors. Underthis framework, the ineffective component is the value that equals to the total risksubtracts the expected risk taking. The empirical result shows that the Agricultural Bankof China, Bank of China, China Construction Bank are the top3banks according to theeffective components of risk taking. Meantime, the effective component of large stateowned commercial banks deviate more than other banks, and this could be resulted bythe macro supervision during their operation. According to the ineffective component,the rank of the ineffective component of the large state owned commercial banks is inthe middle and the rank of other commercial bank deviate more than the large stateowend commercial bank. During the sample period, the ineffective components of themost commercial banks are above0, this result suggest that most commercial banksshow the tendency of over risk taking, and this phenomenon could be caused by themarket competition and the business structure which mainly relies on the loan.Nextly, considering the dynamic and nonlinear characteristic, the correlation effectof commercial banks is analyzed. In order to analyze the commercial bank’s correlationof risk taking, the topology structure of commercial banks is described. The resultswhich based on the Subdominant Ultra-metric Space demonstrate the Medium-sizedjoint-stock banks are more likely at the center of the banks’ network node. Then, byjudging the distance of commercial banks on the network, the commercial banks aregrouped to study the nonlinear and lower tail relationships which are based on thedynamic copula models. The empirical result shows that the lower tail correlation issignificant, especially for the component of risk taking, and the degree is not affected by the distance of commercial banks. The upper tail correlation of overall risk and theeffective component are gradually decreasing with the increasing of the distance ofcommercial banks. Additionally, it can underestimate the correlation in critical conditionif the overall risk is chosen as the monitoring indicator.Finally, based on the theoretical and empirical analysis, some strategies areproposed from micro and macro perspectives to manage the risk taking and correlationeffect of commercial banks. On the one hand, making balance business strategies,implementing a comprehensive risk management, improving the warning mechanism ofrisk and optimization of corporate governance are considered as the micro perspectivemanagement strategy. On the other hand, from the macro perspective, thecountermeasures, such as the improving the macro-prudential regulatory framework andsupervision of market conditions, establishing management mechanisms of correlationrisk and optimizing financial ecological environment should be taken into account.