Studies On Organization Structure Optimization Of State-owned Commerical Banks In China

According to it's commitments on its access to the WTO, Chinese Government permits foreign banks to conduct RMB business from December 11, 2006, which provides the equal chance for domestic and foreign banks in China's banking business. Existing literature about the reform and development of commercial banks primarily focuses on how to make improvements and accelerate reforms, and rarely on how to give a better play to the comparative advantages of Chinese banks. In contrast to their foreign counterworkers, Chinese banks enjoy specific advantages, in particular the advantage in network and market share, which their foreign counterparts can't possess in the short-run. Nevertheless, both the organization structure and network distribution of state-owned commercial banks are not based on market demands, and therefore can't cope with the requirements of the development and competition of financial market. In recent years, some commercial banks have embarked on various campaigns of reform to adjust their organization structures in the hope of satisfying market demands. However, the results of such reforms have gone to show that merely adjusting of organization structures is by no means enough to cope with the ever-changing financial market. The unsound and inefficient organization structure has not only rendered Chinese commercial banks unable to fully tap into their advantages in networks, but also poses as a major obstacle that is hindering the growth and competitiveness of Chinese commercial banks. In addition to the requirement of participating in external competition, other domestic pressures such as the reform of the stock holding system and going public are also demanding that state-owned commercial banks step up the optimization of their organization structures. A systematic study in this field is something that current literature has not yet addressed. Thus the research brought forward in this paper is of high academic value.This paper studies the organization structure optimization of state-owned commercial banks, which aims to fully unleash and exploit the particular advantages of state-owned commercial banks in network. Firstly, the paper reviews the existing literature on the organization structure, and further probes into the current condition, evolution paths and limitations of the organization structure of state-owned commercial banks. In view of the existing problems, this paper conducts an explorative research on the optimal management tiers for state-owned commercial banks under the analytical framework of principal-agent theory. In addition, the conclusions drawn from the model further indicate that the organization structure optimization of state-owned commercial banks should be oriented towards the mode of flat. Based on the conclusion, this paper builds a simple model to further explore the flat organization structure of state-owned commercial banks. This paper finally makes a thorough study into the evolution paths of organization structure optimization and proposes feasible policy recommendations on a tentative basis.The major contributions of this paper, as well as its innovations, are primarily manifested in the following aspects. Firstly, existing research in China on the organization structure optimization of commercial banks is limited to qualitative research and logical deduction. This paper, under the analytical framework of the principal-agent theory, builds a model to demonstrate that commercial banks can optimize their organization structure by flattening such structures. It also provides theoretical interpretations of the business division and operational unit systems implemented by commercial banks. Secondly, the academic community tends to simplify flat as "head office management departments-frontline business departments" when exploring the flat organization structure of commercial banks,. While this paper provides thorough analysis and exploration into the flat organization structure, , and presents useful recommendations. Thirdly, on the basis of theoretical study and model analysis, this paper presents seven principles for the organization structure optimization of state-owned commercial banks. This paper also designs specific models for commercial banks in their flat, vertical and matrix reform.