Theory And Empirical Research On The Determinants Of Commercial Bank Profitability In China

Commercial Banks have a vital role in economic growth of a country and competent banking system is critical for economic development and resource allocation. Commercial banks in China have credit intermediary function, payment intermediary function, credit creation function and financial service function. Under the correct guidance of Chinese macro monetary policy and fiscal policy, on the one hand, commercial banks raise and allocate found for economic develepment of China. They become the connection of the national economy. On the other hand, commercial banks supervise and manage the production and business operation activities of enterprise and optimize the structure of industry of our country by controlling the amount of deposits, loans and their interest rates. Along with our country joining the WTO, the domestic financial market gradually opening to the outside world. Chinese commercial banks need to face the challenge from foreign commercial banks. At the same time, banking industry of China is undergoing a rapid reform from multiple aspects, including industry structure, laws and regulations, operation and so on. Therefore, studying the determinants of commercial bank profitability in China has a great significance for the develepment of banking system.This study uses the method of combining qualitative analysis with quantitative analysis. First of all, the study defines the connotation of commercial bank profitability and summarizes the development and status quo of commercial bank profitability in China. Also, the measurements of commercial banks profitability and its influencing factors are explained in this study. Secondary, 30 commercial banks are choosed as samples in empirical study and the data is from 2006 to 2014. After regressions, The results show that the commercial bank’s size, liquidity, capital adequacy and macro economic environment have significant impact on commercial bank profitability in China. Futhermore, this paper puts forward some suggestions to improve commercial bank profitability. It points out that commercial banks should not only improve the capital adequacy ratio, reasonable control the scale of assets and liquidity, financial innovation and intermediary business are needed to develop, at the same time, the national external regulation and macroeconomic environment are also important.In recent years, under the background of strengthening financial marketization reform in our country, Chinese commercial banks should fully realize their own defects, promote management level and strengthen their profitability to seize the opportunity of development. This paper selects three commercial bank profitability measurements and deeply study the determinants of commercial bank profitability from internal internal and external aspects by using the latest data of samples. Big sample quantity, wide range of time, the strong representativeness of measurements make the results more real-time and accuracy. In addition, based on the empirical research results, this paper puts forward the countermeasures and suggestions for the development of Chinese commercial banks. These suggestions have the reality guiding sense to improve commercial banks profitability and keep banking system developping healthy.