How capital structure affects business performance in Chinese listed commercial banks

Luo, Ting (2011) How capital structure affects business performance in Chinese listed commercial banks. [Dissertation (University of Nottingham only)] (Unpublished)

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In the end of 2006, China realized the opening of financial market, thus Chinese commercial banks have to face the global competitors. The business performance of banks is the overall reflection of competence; however, the performance of Chinese banking industry is still weaker. According to some theoretical basis of capital structure, capital structure affects overall business performance by influencing the corporate governance of corporations. The capital structure of commercial banks also plays a vital role in achieving the financial goals and moderate operation. Thus this study aims to research how commercial banks’ capital structure affects business performance in China, and gives the recommendation to optimize the banks’ capital structure and improve business performance.

This study employs penal data set in a sample of 14 Chinese listed commercial banks from 2005 to 2009. There are two indictors to measure the business performance: return on equity (ROE) and non-performing loan ratio (NPR). Considering the specificity of the banking industry, the study mainly focuses the effects of ownership structure (which includes ownership concentration, nature of owner and circulation stock proportion), supplementary capital and capital adequacy level on business performance. The results for return on equity indicate that proportion of top five shareholders (CR5) which is fairly significantly correlates with ROE positively. But the holding proportion of largest shareholder (CR1) is negative but no significantly affects ROE. Capital adequacy level negatively affects ROE. The results for non-performing loan show that CR1 and CR5 do not significantly affect NPR. The characteristic of the largest shareholder correlates with neither ROE nor NPR, the proportion of circulating stock affects business performance significantly. Finally, the proportion of supplementary capital also positively correlates with ROE and negatively affects NPR.

Key words: bank capital structure, business performance, Chinese listed commercial banks

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 10 Aug 2011 13:18
Last Modified: 11 Jan 2018 01:16

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