A Comparative Study Of Small And Medium-sized Banks Between China And US

Small and medium-sized banks，as the important parts of the financial system,have played a positive role in serving the local economy. Under the background ofChina’s dual economic structure, it is necessory to develop small and medium-sizedbanks, in order to promote balanced economic development, and to better meet thefinancing needs of small and medium-sized enterprises and the rural construction.Based on the positive significance of developing small and medium banks in thecircumstance of China’s dual economic structure, regarding the small bank advantage,the paper does a comprehensive comparative study of small and medium banks interms of their development history, current situation and impact factors of thesustainable development between China and America. In reference to the developmentexperience of American small and medium banks, combined with China’s actualsituation, some countermeasures are put forward to promote China’ small and mediumbanks sustainable development.Based on the related theories, small bank comparative advantage and itsformation mechanism can be summed up. Financial intermediary theory explains therole of financial intermediary in reducing the information asymmetry, while thespecific functions and features of financial intermediaries change with macroenvironment, and are affected by the banking market competition. Scale economy andscope economy in banking industry make the difference between large banks andsmall and medium-sized banks in terms of the business characteristics, loantechnology, organizational structure and other aspects. As a result of small andmedium-sized banks’ advantages in solving the information asymmetry problem ofprocessing soft information, besides, their organizational structure and thedecision-making mechanism and other corporate governance characteristics are moreconducive to reducing the agency cost, small and medium-sized banks thus have thecomparative advange in relationship lending. Therefore, the theoretical basis ofsustainable development of small and medium-sized banks lies in the field ofcomparative advantage of relationship lending. Based on the above theoretical basis,the paper compares the small and medium-sized banks between China and Americafrom the respects of macroscopical environment, market structure, business modeland corporate governance. The empirical analysis of China’s regional financial disparity and regionaleconomic disparity shows, narrowing the regional financial disparity plays asignificant positive role in reducing regional economic disparity. Reducing regionaleconomic disparity and financial disparity are helpful for promoting nationaleconomic growth. The development of small and medium-sized banks, such as ruralcredit cooperatives has more significant effect on narrowing the regional economicdisparity than the state-owned bank has. Therefore, the development of small andmedium-sized banks plays a significant role in narrowing the regional economicdisparity, solving the dual economic structure and promote economic growth. Smalland medium banks should aim to serve for local econmony and local development.The small and medium-sized banks in America have been serving the local economyand the reduction of regional disparity for a long time. Overall, they remain stable andserve the local economy very well, indicating that their development model issustainable. The rapid development of China’s small and medium-sized banks growfast recently, playing an important role in serving small and medium-sized enterprises,enhancing rural financial supply, reducing region economy difference. At present,China’s dual economic structure characteristic is still obvious, small andmedium-sized banks should make use of their comparative advantages to service forthe local small and medium-sized enterprises and the "three rural", making morecontribution to change the dual economic structure.The macro environment and market structure are the external factors whichaffect small and medium-sized banks’ sustainable development. Through thecomparison study, it is found that the development of small and medium banks isbased on specific external environment, affected by economic basis, regulationalconstraints, technical condition and other macroscopical environment; moderatecompetition in the market provides external pressure for small and medium-sizedbanks to form comparative advantage. The American small and medium-sized banksbuild their core position in the characteristics of relationship lending with the effectof economy, system, technology and other macroscopical environment. The easyaccess of banking industry and complete exit mechanism mechanism make the smalland medium-sized banks can fully compete, so the moderate pressure of the marketcompetition provides conditions for small and medium-sized banks to play theiradvantages. The emergence and development of China’s small and medium banks alsoare affected by macro environment, rooted in China’s economy, system and culture.With the development of small and medium sized banks, China’s banking market concentration continuously decreases. Appropriate relax the market admittance policyand gradually perfect the exit mechanism, will promote the banking market structurefurther optimized, having positive effects on enhancing small and medium-sizedbanks’ competitive consciousness and improving their operating performance.Especially in the rural areas of China where the banking market concentration ishigher, develop more rural small banking institutions and increase financial marketcompetition, will promote the development of small and medium-sized banks’relationship lending.Business model and corporate governance are the internal factors of theformation of the small and medium-sized banks’ comparative advantage. Thecomparative analysis shows that, small and medium-sized banks choose businessmodel based on relationship lending, mainly serving community residents, farmersand small and medium-sized enterprises. They focuse their business areas in the localand surrounding areas, in order to facilitate the collection and use of local softinformation. They provide humanized service and products based on the traditionaldeposit and loan business, to establish a close and stable relationship with customers.Small and medium-sized banks ownership structure, organization characterisitcs,incentive and supervision mechanism and other corporate governance factors shouldfacilitate banks to make use of the soft information and reduce agency cost, providingsupport for relationship lending. Small and medium banks’ advantages need thecoordination of business model and corporate governance.Based on the empirical test of influencing factors of small and medium-sizedbanks’ operating performance, the results show that, the macro environment, marketstructure, business model and corporate governance have significant effects on smalland medium-sized banks’ operating performance. Empirical results proves that thesefour factors are the sufficient conditions of sustainable development of China’s smalland medium-sized banks. The countermeasures for their sustainable developmentinclude: further optimizing macro environment, cultivating competitive bankingmarket structure, focusing characteristic orientation in business model, buildingincentive and compatible corporate governance structure.