Empirical Study Of Factors Affecting The Profitability Of Commercial Banks

In recent years, the reform and development of China's commercial banks have triggered massive debates and attracted lots of attentions. Especially under the background of the open-up policy in the financial business, how to adapt to the worldwide financial trends and the challenges foreign capital financial group bring in, both are key factor affecting the national financial security and strategy. On Dec 11th 2006, the foreign banks were allowed to manage the RMB business which meant the competence intensity was upgraded. Result from the left problems of inferior competitions, China's commercial banks low quality of capital, management level and creation. The situations turn better because of the recent financial reform, in spite of dealing with the left bad debt and improving the capital quality, we should focus on the profitability of the bank in order to guarantee the sustainable development.In this thesis two questions are analyzed on the basis of relative researches, they are how to evaluate one bank's profitability and how to inspect the factors. The author firstly start from the inner factors that affect commercial bank's profitability and apply the multi-index evaluation methods. Then the business model of China's commercial banks is analyzed to review bank mostly profit source. And, quantified the level of business development, extracted from the risk variables, operational variables and business variables, erected an econometric models, empirical analysis of the main factors that impact on the profitability of China's commercial banks from 1999 to 2006. Finally, by comparing different empirical results between the state-owned banks and joint-stock banks, analyses different causes and focus on policy recommendations.Only more profound impact on our understanding of the factor which impact the profitability of the commercial banks, can be more effective in improving the increase, this is the original intention of this paper.