The Empirical Research On The Relationship Between Market Structure And Performance Of Chinese Banking Industry

With the transition from planned economy to market economy, the market structure of Chinese banking industry has kept evolving, but highly monopolized market structure has been coexisting with the poor performance for a long time. Under the background that Chinese financial market will be more opened, the banking industry will be faced more drastic competition. Studying the market structure of Chinese banking industry and its relationship between the performances empirically can't only offer experience evidences for a further reform of the banking management's system, but also has practical significance in the establishment and implement of the banking industry policy.Analyzing the market structure of Chinese banking industry by market share, centralization ratio, entering and withdrawal barriers, the result shows that although there is a trend that the market structure of Chinese banking industry is changing to monopoly competition, but the oligarchic monopoly market structure of the banking industry won't be changed in a short-term owning to the limit of the scale, strength and country policy. The study of the performance shows that differences between commercial banks'resources disposition-performances are small because of the financial supervising and managing, but on aspects of management-performance, cost-performance and credit risk, joint-stock banks are different from state-owned banks obviously.Based on the existed empirical research frame, this thesis analyzes the inner link between the market structure and performance of Chinese banking industry by using a panel data model which is taken 15 commercial banks in the period 1996-2006 as samples; market shares (MS), HHI index, cost- income ratio (RRC) and return (before tax) on asset (ROA) as indexes for measuring the market structure of banking industry, bank's efficiency and bank's performance respectively, further more, bank scale (LnA), bank management risk (LDR) and increment rate of GDP (RGDP) are introduced into the model as control variables. The results show that: (1) Market share is significantly negatively correlated with banks'performance in the total samples, so the"market-power hypothesis"doesn't exist in Chinese banking industry; (2) HHI has negative and significant relationships with ROA in the state-owned banks sample, but it's positively correlated with ROA in the joint-stock banks sample. (3) Cost-income ratio has negative and significant relationships with ROA, but the influence of bank's efficiency to market shares or HHI is very small even for negative, so the"efficient-structure hypothesis"doesn't exist in Chinese banking industry too. (4) There is an obvious"economies of scale"in joint-stock banks, but state-owned banks expand their scales with low efficiency. (5) For the four state-owned banks, there is a significant positive relationship between bank management risk and ROA; but for joint-stock banks, there is no obvious negative relationship between them; increment rate of GDP has positive and significant relationships with banks'ROA.According to those results mentioned above, some policy suggestions are put forward as below: (1) The Administrative Monopoly should be broken and much effort should be made to set up the market structure of banking industry with efficient competition; (2) The reform of state-owned banks need to be further strengthened; (3) Middle and small scale joint-stock banks should be supported for expanding management scale and improving scale efficiency in themselves; (4) A better exterior competition environment should be built, such as advancing market-oriented interest rate reform, perfecting the system of exit and supervising and managing system of banking industry.