Dissertation > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Banking system and business

The Effects of Ratio of Foreign Strategic Investors’ Equity Rights on Chinese Commercial Banks

Author YangLiuQing
Tutor Zhang
School Southwestern University of Finance and Economics
Course Finance
Keywords foreign strategic investors commercial banks SYS-GMM empiricalstudy
CLC F832.2
Type Master's thesis
Year 2012
Downloads 211
Quotes 0
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With the liberalization of the banking sector, the influence and penetration of foreign strategic investors were also increased in China. Under this background, this paper analyzes the effect of ratio of foreign strategic investors’equity rights on Chinese commercial banks based on panel data from2004to2010.Firstly, this paper describes the definition of strategic investors. There has been a lot of research about the impact of foreign strategic investors on bank performance. However, existing research can not arrive at a consistent point of views:Some scholars believe that the introduction of foreign strategic investors can raise bank’s performance. Some scholars think it would reduce the bank’s performance. Some scholars believe that strategic investors’impact is not linear. Three possible reasons lead to these different conclusions. Meanwhile, Chinese existing research have2problems.Next, this paper reviews the course of development of the strategic investors in China. They have gone through three stages. Accompanied by the development of strategic investors, the method of foreign capital’participation into Chinese banking industry has experienced a shift from Greenfield Investment to strategic investors. This shift represents a common choice of Chinese commercial banks, the Chinese government and foreign enterprises. Each party can derive benefits.Thirdly, this paper analyses two ways in which strategic investors affect banks’performance. Through these channels, strategic investors have complex effects on bank’s performance.In order to analyze the impact of foreign strategic investors on Chinese commercial banks, this paper establishes a non-linear model which represents the relationship between the ratio of foreign strategic investors’equity rights and the bank’s performance. Profitability, asset quality and risk management are three types of indicators as explanatory variables, while macro-level, industry level and banks level are three types of indicators as control variables. Considering model and data features, to address the endogenous problem and dynamic behavior, we choose the SYS-GMM to estimate the model and test measurement results.The empirical results show that the effect of ratio of foreign strategic investors’equity rights on ROA is consonant with U type and the effect of ratio of foreign strategic investors’ equity rights on CAR is consonant with inverted U type. At the end of the article, based on empirical results, this paper gives some policy recommendations.

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