| The global economy had gone through a long period of deep recession due to the outbreak of the financial crisis in 2008, which in the same time offered alarms for regulatory. Then, the Basel committee issued The Basel Agreement III on December, 2010. Compared to The Basel Agreement II, it had been revised and new measures had been added. According to The Basel Agreement III, one of the most important variations was the new requirements on capital adequacy ratio. Under the new requirements, commercial banks must supplement capital, especially core capital. On June 8, 2012, The CBRC(China banking regulatory commission) released Commercial Bank Capital Management Approach(Trial), implemented from January 1, 2013,in which the capital regulation was stricter than The Basel Agreement III In such regulation background, it is great significance to study a relationship between capital adequacy ratio and profitability for regulatory and commercial banks.Profitability, as one of core competencies in business, is a vital indicator to measure the management effect of commercial banks. And a stronger profitability readily favors positive conditions for the bank’s internal financing. How does the restrict monitoring of capital adequacy affect the profitability of commercial banks? Not only is the question is the question practical and urgent but a theory subject with value.Hence, this paper, based on perspectives of the ratio of capital adequacy in commercial banks, studies the important theory value and practical significance of commercial banks’ profitability.First, in order to provide theoretical principle for empirical tests, this paper describes the theoretical effect of capital adequacy in commercial banks on profitability. Then, from points of capital structure angles, influence mechanism of the capital adequacy ratio in commercial banks on profitability is analyzed. In order to obtain the relationship between listed banks’ capital adequacy ratio in china and profitability, this paper selected 16 listed banks in our country with the financial data between 2008-2014, constructed linear regression model using SPSS software regression analysis. Compared to other methods, multiple regression method allows us to clearly observe the relationship between capital adequacy ratio and profitability. This paper had a breakthrough point, which was based on the bank activities to choose ROE as the indicator of measuring banks’ profitability. This indicator was different from the selection of joint-stock prices used in methods before. This paper also tested the impact of capital adequacy ratio on the profitability for the large state-owned commercial banks and small and medium commercial banks.The empirical results of this paper were as follows. Capital adequacy ratio and core capital adequacy ratio have positive effects on commercial banks’ profitability, and with comparison of small and medium commercial banks, the positive impact of large banks’ capital adequacy ratio on their profitability is smaller. So this paper offers proposals from two aspects of regulators and commercial banks. Regulators should adopt differential capital supervising policies according to actual situation of different types of banks, and encourage commercial banks to issue subordinated bonds. Also, the regulators should strengthen the legal system and the economic foundation education for the market investors and stakeholders. At last, the government should strengthen the supervision role of audit and other intermediary agencies in commercial bank management. As for the banks, they should give priority to increase the core tier one capital, and fully utilize attached capital to improve capital adequacy ratio. State-owned commercial banks should simplify the organization structure. Small and medium sized commercial banks should actively develop businesses suitable for the small-to-medium sizes through taking advantages of their own characteristics. |
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