An Empirical Research On The Relationship Between Ownership Structure And Efficiency Of China’s Trust Company

Based on existing theory I established an empirical research procedure to analyze the relationship between ownership structure and efficiency of trust companies. Using data from available50Chinese trust companies’annual reports from the years of2005to2010, I do the empirical research to estimate the trust companies’cost efficiency (CE), standard profit efficiency (SPE) and alternative profit efficiency (APE). After comparing the advantage and shortcoming between the parameter and non-parameter efficiency frontier approaches, I employed stochastic frontier analysis approach (SFA), at the same time I joined the one-step, two-step and Tobit regression which is a limited dependent variable model.With regard to the independent variables which impact the CE, SPE and APE of China’s trust companies, I decided to choose the Herfindahl index, Z index, Backgrounds of the shareholders, market share and Capital Adequacy Ratio and so on.Through the empirical, I can analyze the values of every year and every trust company’s efficiency, even more I can conclude some useful results and suggestions:China’s trust companies efficiency is negative impacted by the high concentration of its ownership structure obviously, and the controlling power of the largest stockholder has positive effect on the trust companies’ efficiency; besides, the related party transactions are more increased as the stock ownership controlled by less few stockholders; in additions, I found different backgrounds of controlling stockholders have different effects on the efficiency, especially, the trust companies which have financial holding company as the controlling stock are more cost and profit efficient than others.So base on the above analysis, this paper proposed advices for improving China’s trust industry operating efficiency. On the one hand, optimizing the ownership structure,enhancing the independence of operating from stockholders, improving the trust intern corporate governance; on the other hand, the domestic trust industry try to introduce strategic investors to decentralize the share ownership structure in order to improve trust companies’ operating efficiency and corporate governance in the long run.