Financial Holding Company Development Theory

Since the end the 20th century, with the tides of economic globalization and financial liberalization, finance has been playing an increasingly significant role in social progress and economic development. Both the swiftly-booming financing industry and constantly-emerging financial innovations are providing highly efficient services for social and economic development. Integrated operation has undoubtedly become the predominant tendency in the evolution of international finance.As a form of financial innovation, some integrated operation carriers, represented by financial holdings corporations , have incessantly come into being in developed countries. Financial holdings corporations boast the feature of"Integrated within the Group while separated in operation". Such feature enables these corporations not only to gain the dynamic interests of integrated operation but also to cater to the current mechanism of separated operation and supervision.In China, financial holdings corporation is the ideal means for the financing industry to realize its transformation to integrated operation. Hence, to foster financial holdings corporations, being the future trend of financial institutions, is a key channel to enhance the competitiveness of financial institutions. The growth of financial holdings corporations means a great deal for establishing a stable financial system as well as for our economic and financial development.Therefore, based on relevant theories, led chiefly by the development courses, this dissertation enunciates the impetus, development patterns, risk management, facilitating the mechanisms of internal management and external supervision for China's financial holdings corporations, in the evolvement of financial holdings corporations; meanwhile, in accordance with China's specific situation and the current status of financial holdings corporations, the dissertation expounds on how to and presents strategic thinking on promoting the steady development of China's financial holdings corporations. The main ideas are briefed as below:Chapter 1: Relevant theories on financial holdings corporations and related analysis. First of all, it defines financial holdings corporations; secondly, it enumerates five theories related to financial holdings corporations; the rest of this chapter analyzes functions of financial holdings corporations and thereby abstracts their four major functions. In my humble opinion, as a form of innovation in financial organizations, by classification, combination, designing and allocation of resources, financial holdings corporations reduce the costs, realize the rational allocation of resources; in the meantime, they are key participants and competitors for national or even global financial markets, dominating the development of the financing industry.Chapter 2: The impetus of development and the development patterns of financial holdings corporations. The impetus of swift development of financial holdings corporations are from two angles, namely, internal impetus and external impetus. It conveys the opinion It conveys the opinion that the evolvement of financial holdings corporations is the embodiment of the risk and income mechanism in the financing industry. Introduction to foreign financial holdings corporations and comparative analysis of five different patterns. It is for the first time that three assumptions are proposed to be considered as the basis of choosing which pattern for China to follow in face of the general trend of integrated operation.Chapter 3: Risk management during the development process of financial holdings corporations. It is exactly risk that the financing industry focuses on handling, yet on the other hand, financial institutions are also seekers of profit maximization. From the perspective of integrated risks (in other words all-sided risks) management, this chapter analyzes common risks and special risks, proposes the risk management pattern of financial holdings corporations based on the empirical analysis on Japan's RUISHUI Financing Group.Chapter 4: Promoting the internal management mechanism of financial holdings corporations. The internal management mechanism is the first line of defense for financial holdings corporations to control risks. There are generally two levels for such mechanism. First, the group company should form an internal management mechanism aiming at supervising overall risks; second, internal management mechanism in each subsidiary should also be set up under supervision so as to fit different business features. Based on discussions in three aspects, namely, internal control system, corporate management system and stimulation and obligation system, this chapter claims that corporate management for financial holdings corporations is still an institutional arrangement whose kernel is the property right and whose key problem lies in tackling stimulation and obligation system.Chapter 5: Promoting the external supervision mechanism of financial holdings corporations. In the first place, this chapter analyzes the supervision to financial holdings corporations from the perspective of market malfunction theory in western microeconomics (natural monopoly, external effects and information asymmetry), holding that governmental supervision is a crucial means to cut down or remove financial market malfunction. Secondly, this chapter conducts an international comparison between the supervision of financial holdings corporations. In my humble opinion, financial holdings corporations are also giving birth to considerable risks while they are bringing about huge operation income. The rich experiences accumulated by western countries during their transformation process from separated operation to integrated operation are worthwhile for China to learn.Chapter 6: The current status of China's financial holdings corporations. Introduction to the history of China's financial holdings corporations precedes the analysis on four types and the traits of China's financial holdings corporations. This chapter points out that the operation conditions for China's financial holdings corporations bear special characteristics. In comparison with the factor characteristic and operation environment for their counterparts in developed countries, financial holdings corporations in China are born with their own peculiarities.Chapter 7: Strategic thinking on promoting the development of China's financial holdings corporations. Finance is the life line of economy and the steadiness and development of finance is closely connected with that of economy. This dissertation holds the opinion that the benign development of financial holdings corporations is conducive to the enhancement of competitiveness in financial industry, the efficient configuration of financial resources and the secure and sound operation of financial system. To foster financial holdings corporations in developing countries needs not only to learn from experiences and lessons from developed countries, but also to stand firmly on the particular conditions in China, cautiously unfolding the process step by step during the deepening of our financial reformation. At present, we must stick to the market-oriented mechanism in which government plays an effective role; we must strengthen the market awareness of China's financial holdings corporations, cultivating their core competitiveness; we must stress the scientific policy-making and risk prevention mechanism in financial operation, based on the construction of internal control which guarantees the normal operation of financial holdings corporations; and we must steadily promote the reformation of China's financial supervision system.