Study On The Assessment And Factors Of The Profitability Of Commercial Banks In China

Facing the globalization trend of financial market and increasingly fierce competition in the banking industry, how to improve the banks’profitability is a severe problem for China’s banks to take steps. With the continuous deepening of reform, China’s commercial banks are entering a new integrated development period, in which once you seize the opportunity to develop a path with own characteristics, you may be the vane of the banking industry. Therefore, numerous articles and papers about the profitability of China’s commercial banks have been published by either the bank staff or the researchers. However, most of the existing literatures measured the profitability by return on assets, which neither accurately reflects the bank’s developing potential nor possible risks. Besides, the existing literatures tried to find the influence of the capital adequacy, asset quality, assets and liability structure on ROA, and they failed to indicate the direction of banks’ reform form the perspective of the whole market economy.This paper based on the background of China’s reform of commercial bank and interest rates market-oriented reforms, using20commercial banks’data from2005to2010for the sample, it focused on the assessment and factors of banks’ profitability. The paper mainly had5chapters:the first chapter expounds the reform status of China’s commercial banks and the significance to study on banks’ profitability. The second chapter classified and summarized the existing literature from two aspects:the commercial banks’profitability evaluation research and factors that affect commercial banks’profitability. The third chapter is theoretical analysis part. This chapter defined the concept and measurement of commercial banks’profitability, and analyzed the factors that impact the banks’profitability form three aspects, and then put forward the research hypothesis of this article. The fourth chapter is about empirical analysis. This chapter had two parts. The first part measured the dependent variables in a new way, in other words, it chose10financial indicators for factor analysis, and finally gave out a score table and ranks about the20banks’comprehensive profitability. The second part used GDPGROW as the substitution variable of macro environment, used REALRATE as the substitution variable of medium monetary policy, used H5, STATEOWN and FOREIGN as the substitution variable of micro ownership structure, and established the multiple regression model. Using this model, this article analyzed the influences that the macro environment, medium monetary policy and micro ownership structure had on the profitability of banks. The result of this paper demonstrated the previous studies and further showed that the higher GDP growth rate, the higher deposit reserve ratio, the stronger profitability of commercial banks; the more dispersed shareholding structure, the stronger profitability of commercial banks; the higher proportion of the state holding, the weaker profitability of commercial banks; the higher proportion of foreign ownership, the stronger profitability of commercial banks. Chapter5discussed the countermeasures and future research direction.The possible contribution of this paper is that we chose10indicators from the initial investment, efficiency in the use of the assets and the past management status, etc., and produced the specific score of each bank’s comprehensive profitability in each year, which could be an objective, reasonable and comprehensive way for judgment. In addition, the explanatory variables selected in this paper is based on the proposed reform in the context of China’s commercial banks, but not the financial data disclosure in the banks’financial statement. Thus, the result of this paper can better reflect the true role of policy guidance and equity restructuring.