Research On The Performance Of Commercial Bank And Asset Liquidity

Owing to the system, bank industry in China has been taking no account of liquidity management all along through the past. Along with further reform of financial system and picking up of internationalization process, inside and outside conditions for commercial bank commercialization operating have been mature gradually. Liquidity risk has been one of the biggest management risks which commercial banks must face up to. Whereas, based on the relationship between preference and liquidity of banks, this paper studies on banks'performance evaluation to look for the combination point of controlling risk and pursuing maximum profit.Firstly, based on the literatures about banks performance and liquidity, we analyze the relationship between liquidity and security. Because liquidity risk is the direct reason which leads to bank bankruptcy, keeping liquidity is meaningful as well as security. However, as the substitutable relationship between liquidity and profitability, the bank should choose a equilibrium point so as to maximize profit, which is analyzed by indifference curve. After analyzing relationship between liquidity, security and profitability, we set a estimation model on bank performance by profit function, and make empirical research by lineal regression model using data form China commercial banks. And the result suggests that (a) liquidity indexes have positive effect on bank performance; (b) profit indexes could explain performance well; (c) test of scale factors show that there is no obvious scale effect on the bank market.