The End Of Month Effect Of Commercial Bank’s Financial Product

Financial product is a capital investment and management plan, particularly for the target customers of commercial banks. Of course, commercial banks design financial products on the basis of analysis of the potential target audience. Actually, commercial banks make investment and carry out asset management in accordance with the contracts that they signed with the customers. The risk and return is borne by customers or by customers and banks in accordance with the agreement made in advance. The substance of financial product is financial plans made by commercial banks, in order to make investment and asset management for customers.The issue of financial products in China has been expanding. The first actual financial product was born in September,2004and the number of financial planning products even reaches2888till December,2012. Now competition among different kinds of financial institutions is the service. Financial product in China has a distinctive feature:every product has a time limitation according to the issuing bank.Chinese financial planning products themselves have a distinctive feature: Every financial planning product has a time limitation according to the issuing bank. Thus, will banks increase their circulation of financial planning products at the end of a month in order to evade supervision of China Banking Regulatory Commission (CBRC) indirectly? Then, what will happen to the expected yield, the sales period, the investment period, and the dimension of financial products issued at the end of a month?This research intends to explore the end-of-month effect of Chinese financial products by making use of the history data between January,2006and31st August,2012. Financial products can be then classified into two kinds:the time limitation including the last day of a month; the time limitation barring the last day of a month. This research will compare the two kinds of financial products in the sales period, the highest expected rate of return, the average size of issuing scale, and the investment period. The results of all these comparisons will be examined by t-test and Wilcoxon-test.According to the results of the unpaired data test, there exists end-of-month effect in financial products during all the window phase. It is shown when sales of financial planning products cross the end of a month, the sales period and the highest expected rate of return of financial planning products, and the investment period and the average size of issuing scale of break-even-fluctuation financial planning products will be higher than non-end-of-month sales on the above all aspects. However, results of the paired data test are a little bit different from the unpaired data test. It is shown that when the supervision of banks has been strengthened, commercial banks usually choose to issue the guaranteed-profit financial planning products that has a higher excepted yield and the break-even-fluctuation financial planning products that has a longer sales period in order to reach the supervision standards of loan-to-deposit ratio at the end of a month.