Research On Building The Reputation Rating Model Of China’s Commercial Bank

The most influential events in China’s banking industry are the shareholding system reforming of four state-owned commercial banks and the continuous relaxation of the market access system over the past decade. Surprising all of us since the two reform measures have been implemented, the operating performance of China’s commercial banks began to triumph. Not only the status of capital adequacy ratio has been improved, the chronic problem of long lasting non-performing loans seem to suddenly be solved. The explanations for this phenomenon from academia are clear property rights and complete corporate governance structure, and so on. The explanation of this great historical process of China’s commercial banks from reputation theory is uncommon,and the research of the persistent problems of commercial banks reputation in China based on the theory is more rare.If you want to achieve the goal, you must prepare for it. Sorting,refining and summary on the foreign literature have been basic work of academic research on theoretical explanation or empirical research for domestic scholars, especially the the pedigree of reputation theory are outstanding foreign scholars (Kreps, Milgrom, Roberts, Wilson). We sorted the theory of classical literature and the latest foreign reputation literature, we study that the reputation mechanism inherent principle can be described for the reputation of the establishment of the relationship, the problems of reputation persistent and the correlation of reputation and market characteristics. The connotation of the reputation of the establishment of mechanisms can be extracted for "If consumers have good experiences on enterprise products,then will gradually increase the posterior probability of the enterprises of inept type enterprises". It means that the construction of corporate reputation is a process, so that consumers can slowly confirm their ability and type. The problem of reputation persistence stems from Cripps et al (2003)’ summary.Cripps et al (2003) found that if the general types of commitment type behavior is not a stage game equilibrium strategy in the Nash equilibrium in repeated games of incomplete information, short-term players almost certainly would know the long-term players type. Since then, foreign scholars have proposed to solve the persistent problem of corporate reputation from three perspectives, this article will refined them of the "ownership uncertain mechanism""competition mechanism "and "rating system". Succinctly said,"ownership uncertain mechanism""competition mechanism "and "rating system" can give exert internal and external incentives to enterprise managers to curb their opportunistic behavior, and force them to build their own long-term reputation. Reputation theory is applied to the analysis of the reputation persistence of China’s commercial banks, we find reputation theory have very strong explanatory power. That national reputation guarantees state-owned commercial banks actually bring the opportunistic behavior of the people will eventually make this guarantee unsustainability in the long term. The State introduced the "ownership uncertain mechanism""competition mechanism ", and eased access to the banking market to avoid the bankruptcy of the bank reputation,finally inhibit the actual control people of he commercial banks’opportunistic behaviors, and improve the operating performance of state-owned commercial banks. However, we find our government introduced "ownership uncertain mechanism""competition mechanism ", but "rating system" in the market for commercial banks has not been established, and this is a shortcoming of financial markets.To compensate this shortcoming on the state’s financial market, This article build an empirical model of reputation rating for China’s commercial banks based on reputation theory and stakeholder theory. Given the interpretation of the classic definition of corporate reputation,we can infer the definition of the reputation of the commercial banks"The essence of the reputation of commercial banks is a comprehensive embodiment of the past behavior and the results of commercial banks,it can prove the ability of commercial banks to provide valuable output to the various stakeholders, and can measure the relative fame in the middle of the external stakeholders".From the definition of commercial banks, we can find that if you want to evaluation the reputation of commercial banks,you must define the stakeholders of commercial banks in advance. This article uses the classical method of stakeholders theory "Mitchell score" to define and classify the stakeholders of China’s commercial banks. The requirements of finishing of the commercial interests of stakeholders. In this paper,"Mitchell score" which is the classical method of stakeholders defining and classifying is used to define the stakeholders in China’s commercial banks. And then, we build up the underlying index of the reputation rating of commercial banks. Based on these index and survey data,we do an empirical analysis of the stakeholders, and finally build up the reputation rating model of commercial banks in ChinaThrough research and statistics, this paper extract six common factors from the data, the service soft power and compliance, services hard power, government relations and the competitiveness of products, prudent business management, employee satisfaction, size and operating history are included.The study found that the factor of service soft power and compliance makes up the largest proportion in the reputation rating model. Theoretically, the service soft power is closer to the nature of the reputation as the basic connotation of "soft power" is a kind of ability to integrate resources, it indicates the spirit and norms of an enterprises. And the effective time of the "soft power" in the competition is much longer than the effective time of the "hard power", so the stronger the "soft power" of a business, the stronger impulse of pursuit of long-term interests will be. With the maturity of China’s market economy, various stakeholders of commercial banks will increasingly focus on "soft power" of commercial banks rather than "hard power", and the competition of the China’s commercial banks in reputation will farewell to the competition of hardware resources, but in the era of competition "soft power" in the future. The factor of service hard power makes up the second proportion in the model of reputation rating. The two factors of service soft power and compliance and service hard power make up more than70%in the model, in contrast, the third of the government relations and the competitiveness of products only makes up9%,, which shows that the government relations is no more the most important one in the evaluation of the reputation of commercial banks. This prove from another side that the effect of "alternative mechanisms "and" competition mechanism "in the implementation of the reform of commercial banks,the stakeholders have fully understood the importance of the competitiveness of banking services, and no longer believe in the government guarantee of commercial banks. In addition, this paper also explains why the score of the products and services security "is higher than the" products and services profitability in the reputation rating model. It found that it is due to the risk aversion characteristics of our bank customers (depositors and investors), this also leads to the existence of "risk control"," compliance "and "prudent management" in the reputation rating model, customers’characteristics of risk aversion affect the overall structure of commercial banks’reputation in China.Reputation rating mechanism for commercial banks can be provided both by the central government and the market. Considering that the central government remains the controlling shareholder of the state-owned commercial bank and the information it provides is not so comprehensive, so it is more feasible and credible to do the comprehensive rating based on information collection by independent market rating agencies. The reputation rating model constructed in this paper is a very important step to build up the China’s commercial banks reputation rating mechanism. Based on this model, we can collect related data and information and publish the result of reputation rating regularly.This has a very strong practical significance of encouraging commercial banks to establish long-term reputation and curb opportunistic behavior.