Study On Rural Financial Market Entry Mode Of Commercial Banks

Rural financial market is weak part in Chinese financial system. How to solve the supply-demand imbalance of rural financial services and how to improve financial services have been focus of public's attention. In the end of 2006, CBRC lowered standard of rural financial market entry to attract commercial banks as main financial institutions into rural financial market, increasing supply of rural financial services. Despite their entry has eased tense situation of supply deficiency to some extent, problems also come up. The existing rural financial organizations, represented by rural credit cooperatives have limited supply capacity, but commercial banks couldn't fill the huge gap effectively, and banks'market entry mode tends to be single, which is not conducive to corporate with existing financial institutions in rural financial market. Besides, new rural financial institutions initiated by commercial banks tend to have the same business objectives as initiating banks and have target-location error, and profitability and sustainability of some branches of commercial banks are not optimistic.This paper chooses entry mode which is a new perspective to explain those puzzles and it divides entry mode into direct and indirect modes. This paper analyzes factors having effects on commercial banks'market entry mode, and then builds entry mode choice model including banks'heterogeneity and government policy variables. On base of the model, it does numerical simulation and comparative static analysis, and then concludes three conclusions:Firstly, because of heterogeneities, different banks should choose appropriate entry mode to ensure their profitability and sustainability after market entry. Secondly, fixed costs, unit cost of capital and market frictions will affect banks'market entry mode, and the effects'degree are different. Thirdly, government policies and policies'strength have remarkable effects on banks'market entry behavior and their entry mode.This paper has three innovations. Firstly, it chooses entry mode which is a new perspective to analyze different appropriate entry modes for different banks and tries to resolve existing issues such as supply-demand imbalance and entry modes tend to be single. Secondly, this paper adds government policy variable into theoretical model creatively, making the model closer to actual situation in China. Thirdly, this paper comprehensively uses theoretical model analysis, numerical simulation and comparative static analysis, which make useful supplement to research methods in the field of rural finance study.