The Effects Of Introducing Foreign Strategic Investors On Chinese Commercial Banks’ Efficiency

In recent years, with the rapid development of the internet and the process of the interest rates marketization, our traditional banking industry is facing intense competitive pressure. In order to face with the impact of the new situation, Chinese commercial banks are urgent to "change" and " transition" for solving the existing problems. While one important and appropriate measure is the introduction of foreign strategic investors. In 1996, Chinese commercial banks introduced foreign strategic investors for the first time. Then foreign institutions sped up to invest Chinese commercial banks. Until the end of 2006, there were 14 Chinese commercial banks having introduced foreign strategic investors, foreign strategic investors’ total equity investment in the banks has reached $20 billion. By the end of 2015, the Postal Savings Bank of China introduced six international financial institutions as foreign strategic investors, they were UBS, JP Morgan Chase and DBS Bank. Visibly, in order to fit the theme of the times and enhance the market competitiveness, more commercial banks are bound to introduce foreign strategic investors in the future.However, foreign strategic investors can really help solve the problems of commercial banks, especially in improving their efficiency level? There have not yet come to a unified conclusion currently. For this purpose, based on some relevant theories, the paper is aimed to discuss whether there is a relationship between the foreign strategic investors and Chinese commercial banks’ efficiency, then come to a conclusion and make recommendations accordingly.The thought of this paper are as follows:Firstly, expounding the history and the reasons of Chinese commercial banks’ introducing foreign strategic investors. Then theoretically discussing the impact of introducing foreign strategic investors on the efficiency of Chinese listed commercial banks on the basis of the corporate governance theory and the foreign direct investment theory. And finally doing the empirical research based on 10 listed commercial banks’ data.This paper will divided the sample banks into two categories:state-owned commercial banks and joint-stock commercial banks. In addition, there are four variables selected to reflect the introduction of foreign strategic investors, namely foreign strategic investors dummy variable, the number of foreign strategic investors, foreign strategic investors’shareholding ratio and its status among the shareholders. This paper will do research on how these four variables affect the efficiency of the two types of commercial banks with the regression analysis method.The thesis consists of five chapters, mainly related as follows:The first chapter is the preface. This chapter expounds the background and significance of this paper, the domestic and overseas literature, the content, the basic framework and the method of this paper. Meanwhile, the paper also explains the contribution and deficiencies.The second chapter is about the history and the reasons of Chinese commercial banks’ introducing foreign strategic investors. It is about the history of the introduction of foreign strategic investors in our banking industry. Besides, this paper analyzes the reasons why Chinese commercial banks want to introduce the foreign strategic investors and why the foreign strategic investors decide to buy the stocks of our banks.The third chapter analyzes the theoretical basis of the impact of foreign strategic investors on Chinese commercial banks’ efficiency. Foreign strategic investors can affect Chinese commercial banks’ efficiency through two ways. Based on the theory of corporate governance, foreign strategic investors can affect banks’ efficiency through affecting the internal governance level. Based on the foreign direct investment theory, foreign strategic investors can affect banks’ efficiency through affecting the management level.The fourth chapter is the most important part of this paper, it does the empirical study on the impact of foreign strategic investors on the efficiency of Chinese listed commercial banks. The paper chooses 10 Chinese commercial banks which have already introduced foreign strategic investors as the study objects, then adopts the data envelopment analysis (DEA) with the super-efficiency DEA model to measure the efficiency of commercial banks. After that, it does research on how the four variables which are on behalf of foreign strategic investors affect the efficiency of the two types of commercial banks by establishing the Multiple Linear Regression Model.The fifth chapter contains the conclusion and recommendation. After combining the theories and the empirical part, the paper draws the conclusions:as with the increase in the shareholding ratio and the number of the foreign strategic investors, the efficiency of the state-owned commercial banks will rise, while for the joint-stock commercial banks is invalid. Based on the conclusions, this paper proposes five pertinent suggestions finally.The contribution of this paper is as follows:1. In terms of research methods. This paper adopts the data envelopment analysis (DEA) with the super-efficiency DEA model to measure the efficiency of commercial banks, so the results of measuring will be more comparable and accurate.2. In terms of the variable selection. When choosing the foreign strategic investors variables, this paper takes every aspects into account. Finally it determines four variables which can fully reflect the situation of the foreign strategic investors.3.This paper divides the sample banks into two categories:state-owned and joint-stock commercial banks, then respectively does the empirical research. At last, it puts forward the pertinent suggestions. It’s valuable.However, there are also shortcomings:1. About the data collection. This paper only selects the listed commercial banks as the research objects, without considering the non-listed commercial banks. Although the author spent a lot of time and effort collecting the data, the results is still not ideal. Due to the difficulty in collecting the data of urban commercial banks, this paper doesn’t consider urban commercial banks as the research objects, which leads to the analysis is not comprehensive.2. Different types of foreign strategic investors may has different influence on the efficiency of commercial banks, but this paper doesn’t do study by classification of the foreign strategic investors.