Author: Zhang, Sisi
Title: Will shareholding reform improve the performance of banks in China?
Degree: M.Phil.
Year: 2003
Subject: Hong Kong Polytechnic University -- Dissertations
Banks and banking -- China
Corporations -- Investor relations
Department: School of Accounting and Finance
Pages: vii, 159 leaves : ill. ; 30 cm
Language: English
Abstract: This thesis seeks to analyze and compare the performance of state-owned banks (SOBs) and shareholding banks during the period 1993 to 2000. The analysis and empirical work are undertaken within an institutional framework developed from theories of bank performance. Despite the fact that the accounting data is incomplete and inconsistent, regression studies tend to support the opinion that ownership is a significant factor in explaining the differential performance between the two groups of banks. It follows that an in-depth institutional analysis originating from the state-owned and shareholding ownership structure of banks can offer more insights into the differential performance. The relatively worse performance of SOBs can be attributed to the negative impacts of their high stock of non-performing loans (NPLs) inherited from the past, the rigid corporate governance structure, the ineffective enforcement of a credit management system and an inflexible personnel policy. In contrast to SOBs, the comparatively better performance of shareholding banks is due to exemption from policy loans and historical burdens, effective corporate governance, and market-oriented personnel policy and incentive mechanism. Although, shareholding banks possess advantages over SOBs; it is argued that PBOC exercises an unfair supervision - SOBs enjoy preferential treatment in conducting new and profitable business while shareholding banks are prevented from such opportunities. In addition, more policy support is lent to SOBs to solve their NPLs while little effective measures help shareholding banks to do so. Findings of the thesis support the justification of policy actions taken by the government and commercial banks in recent years. The government policies include enhancing the supervisory role of the PBOC, setting up of asset management companies and policy banks to prevent the formation and reduction of NPLs in the four SOBs, and improving the financial and governance structure of banks and their credit management. On the other hand, the commercial banks have also taken several remedial measures to improve their management and performance such as reducing costs of employees and branches, setting up a credit scoring system, and improvement of audit and accountability systems. Based on the research in this study and taking into account the threat of competition from foreign banks after China's entry to the WTO, several recommendations could be made. The government should adopt effective measures to help shareholding banks to write off bad loans, the PBOC should continue the policy efforts of allowing banks to provide a wider scope of non-banking business, and market-based personnel policy and incentive mechanism should be allowed. Both SOBs and shareholding banks should strengthen their capital base and be monitored closely, while actively promoting their consumer products, and seeking partnerships with foreign banks.
Rights: All rights reserved
Access: open access

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