Performance Appraisal Of Commercial Bank Based On Factor Analysis

With the constant promotion of market economic system reform in China, the competition of banking industry is increasingly fierce and more and more attention are paid on the performance appraisal of commercial bank. It is a hard year for commercial bank in 2014 under the pressure of descending economy. What’s more, it becomes very important to conduct the performance appraisal of commercial bank with scientific and objective method under the impact of internet finance which brings great challenge for commercial banks. There are many problems of former performance appraisal method such as strong subjectivity incomplete which result in lacking of objectivity and inaccurate reflection of performance appraisal. Therefore, it is a problem demanding prompt solution to establish a performance appraisal system with united scientificity and easy-operability and suitable for China. After a contrastive analysis of several performance appraisal methods, factor analysis is adopted as the main method for appraisal. It mainly discusses the index of performance appraisal, method selection and model building with the annual report data of listed commercial bank in 2014 based on relevant researches to find a new idea from existing studies.It mainly analyzes the business performance of 16 listed commercial banks of China in 2014 and all data are from the annual report of each bank in 2014. Empirical research and theoretical research combining method is adopted to appraise the performance of commercial banks in China with combined index of financial and non-financial index. What’s more, the reason of performance difference is also analyzed through comparison. At last, it reviews the applied method and puts forward policy suggestions to perfect the performance appraisal of commercial banks in China based on the research results.Firstly this paper discuss that commercial banks are now facing the huge transformation pressure, so the study on the performance evaluation system is meaningful. Next this paper conducted the review of the commercial bank evaluation theory, and introduced the performance content, gave a brief review about financial index, X, efficiency and comprehensive evaluation of the performance of commercial bank in the literature. In the second chapter, we compared several performance appraisal methods. Most of these techniques use subjective evaluation of the technology, such as expert scoring method. It will be a certain subjective in the evaluation results. So this paper adopts factor analysis as the main method for appraisal.Chapter 3 is the empirical part of this paper. Basic steps and principles of performance appraisal with factor analysis method is firstly discussed and then performance appraisal index system is established according to construction principle of performance index; next, it conducts an appraisal for the performance condition of sample banks in 2014 by factor analysis. At last, it has verified the correctness of results and analyzed the relevant appraisal results through clustering analysis and discriminant analysis which are from multivariate statistical analysis.Finally, some policy suggestions are proposed to prefect the performance appraisal system in China. In author’s opinion, external performance appraisal standard of commercial banks shall be unified and non-financial index shall be brought into the system referring to foreign advanced experience to regulate the data disclosure system, strengthen the executive force of performance appraisal and establish a performance appraisal system suitable for China.