The Research To The Influential Factors Of China's Commercial Bank Profitability

In recent years, the reform and development of China’s commercial banks havetriggered massive debates and attracted lots of attentions. Especially under thebackground of the open-up policy in the financial business, how to adapt to theworldwide financial trends and the challenges foreign capital financial group bring in,both are key factor affecting the national financial security and strategy. Identifyfactors which affect china’s commercial banks profitability and accordingly to improvetheir core competitiveness are the most pressing concerns for the academic community.On the basis of reviewing relevant Chinese and foreign literature, firstly Idescribed the definition of the profitability of commercial banks, four operatingprinciples and profit model. Secondly, the normative analyses of the factor whichhave influenced the profitability of Chinese commercial banks are addressed,including the bank’s own internal factors and external macro-factors (capital adequacyratio, operational efficiency, asset quality, asset credit, inflation rates, GDP, M2money supply, the annual import and export value). By using the empirical modelDemirguc-Kunt and Huizinga (1999) and adding some appropriate correction. Iselected14commercial banks data of2000-2009for the analysis.Finally, refer to sub-prime crisis in the Western financial institutions, comparedwith China’s commercial banking industry, I propose to build sound corporategovernance, make credit risk management, strengthen internal controls and risefinancial innovation R&D capabilities, diversified income earnings, and promoteeffective cost control to improve profitability of Chinese commercial banks.