The Research On Factors Of Rural Commercial Banks’ Profitability In China

With the acceleration of reform of economic system, the rural commercialbanks of China have become an important part of Chinese banking industry, as theoutcome of reformation of rural credit association. Within the reform of overallbanking industry，the question how to improve the profitability of Chinese ruralcommercial banks has been in the center of banking system.On the basis of previous abroad and domestic reach on profitability ofcommercial banks, this paper conducts a profound research on profitability ofChinese rural commercial banks and its influencing factors, with regard of theirspecific condition. First of all, the history and current condition of Chinese ruralcommercial banks are introduced, as well as their strength and weakness. Then, thispaper explains the content of profitability of commercial banks, and analyses thefactors that influence the profitability, which are equity capital, asset quality,business structure and private capital ratio. What’s more, some financial indexes areselected, and an initial model is built to conduct a Multiple Linear Regression.According to the result of the initial model, a correction is conducted by StepwiseLinear Regression. This paper analyses the final result according to the fixed model.The result shows that the ratio of equity capital, the coverage ratio ofnon-performing loans and ratio of private capital among institutional shares arepositively related to the profitability of rural commercial banks, while the ratio ofnon-interest income is negatively related to it. Finally, with the theoretical andempirical analysis, several suggestions are provided to improve the profitability ofChinese rural commercial banks.