Study On The Effectiveness Of China's Commercial Banking Market Constraints

When the bank is taking venture behavior, the stakeholders play an effective constraint role. Bank’s stakeholders mainly include three aspects:One is the rights and interests of the bank, the bank’s shareholders; The second is the bond holders, mainly is subordinated bond holders;The third is the main creditor of the bank, namely depositors. For shareholders, whether the large or the small, they all can share all of the bank earnings, but. Accordingly, to the shareholders, although they can apply constrains in some extent to the bank, at the sane time, they have the incentives to make the bank engaged in the high risk investment; For subordinated bonds holeders, in one hand,once the bank bankrupt, they will1bear limited liability of their own investment as well as the shareholders.But they cannot share the bank with all the earnings.In the other hand, the liquidation sequence of its principal, interest is behind other debt (before equity capital).Therefore, subordinated bond holders don’t have the incentive to make the bank engage in high risk investment, and they pay more attention to the bank’s risk than other creditors; For the depositors, implement market discipline in two ways:withdraw and raise interest rates. From abroad research in markte displine of the deposit, it has good constraint function to the bank risk,and it is one of the most common use and better effect constraint tools. To sum up, this article will from two angle to study the market discipline:the deposit and subordinated bonds.First of all, it discusses the related theory of the market discipilne, including the influence factors, utility analysis, and deposit insurance and the relation between market discipline and deposit insurance, etc,which is the theoretical foundation of the full text. Then it analyses the market discipline mechanism of deposit and subordinated bond from theoretical and empirical respectively. For the depositor is concerned,it gives the market restraint mechanism at first, and then validity of the market discipline under different deposit insurance system is deduced through the model. Finally, it uses nearly10years data of listed banks to do the empirical analysis from the market restraint and price constraint respectively.The results shows that the deposit market discipline does exit, but of weak impact.At the sane time, depositors emphasis on different aspects from different channels:in price constraint, the depositors emphasis on the liquidity risk of the banks;in quantity constraint,they have more strongly reaction to the bad loans;For subordinated bonds, firstly it introduces the present situation of the subordinated bonds.Secondly,it establishes the Black-Scholes option pricing theory model, and uses the model to derive subordinated bond market constraint under different deposit insurance system.Finally,it empirical choses the subordinated bond data of the state-owned banks and joint-stock commercial banks to carry on the analysis. The result shows that the subordinated bond discipline exists, but the effect is very weak.As full cover of the implicit insurance system, investors pay more attention on own characteristic variables of the subordinated bonds and domestic overall economic situation,but less on bank’s operating status and risk level.In addition, in the empirical analysis, all the sample banks are divided into two parts:state-owned banks and non-state-owned banks.It carries on different analysis between the two parts, and draws the relevant conclusion. The end of the paper puts forward policy Suggestions in view of the above research process.