Research on Corporate Governance Mechanism Based on Listed Commercial Banks
|School||Dongbei University of Finance|
|Keywords||corporate governance commercial banks ownership structure board of directors executive compensation|
From the Southeast Asian financial crisis to the 2008 subprime mortgage crisis, the world’s economy has suffered a lot. Corporate governance of Banks and other financial institutions is being a hot issue. As intermediary financial institutions and pillars of the national economy, the condition of corporate governance of banks has a direct relationship with the sustainable development of national economy.In July 2010, Agricultural Bank of China have being a listed company successfully. So far, the traditional four state-owned commercial banks are all listed; China has already 16 listed commercial banks. When China access into WTO, China had made a commitment that the banking sector had a 5-year’s transition period, till now, foreign banks already enjoy full national bank identity, in this background, how to shape an outstanding bank group that with fine corporate governance mechanisms to protect themselves against the foreign banks’ Fierce competition becomes rather important.Thus, with world’s economy closely linked today, it has a clear sense of the times to develop a deep study of the governance characteristics of commercial banks and to find out the gap between international "old" banks and ours, particularly the state-owned commercial banks which has numerous historical issues on governance characteristics.Firstly, this paper analyzes the special nature of commercial banks and the resulting specificity of its corporate governance, mainly represents in the complex agency relationship, the diversity of corporate governance objectives, more serious of information asymmetry and the limited role of external governance mechanisms.Secondly, this paper studies the features of corporate governance of listed commercial banks from three aspects, the ownership structure, board composition and senior management incentive. In this process, this paper uses normative analysis and comparative analysis methods, using the public report data of the listed banks, and makes a contrast with international banks.In ownership structure respect, this paper selects following indicators, shareholding ratio of the largest shareholder, equity balance degree, the nature of the largest shareholder, the situation of foreign ownership among top ten shareholders;In the composition of the Board respect, this paper firstly makes a brief introduction of the mode of the board, and then selects following indicators, the board size, proportion of independent directors, times of board meeting in a year, and the situation of professional committees;In the executive compensation respect, this paper introduces the salary system, managements’ holding situation, and long-term incentives plan and so on.Thirdly, this paper argues that certain governance mechanism must lead to certain governance results, Therefore, after the classification of banks, this paper selects two indicators measuring governance results, one reflects profitability by using EPS; the other reflects assets quality by using non-performing loan ratio.By comparing the two indicators, I find that state-owned commercial banks are always in a poor situation; whether in terms of EPS or asset quality.Therefore, this paper focuses on the corporate governance defect of state-owned commercial banks, and find that For the aspect of the structure ownership,the investor’s location are ambiguous, state-owned equity have comparative advantage, equity balance degree is relatively lower; for the board system, there is an unclear division of power and responsibility between the party committee and the board,the appointment of board member has the color of executive, independent directors and supervisors’ responsibilities overlap a part; for executive incentive, the executive’s reward relatively low, incentive system has deficiencies and lack long-term incentives plans.Fourth, for the existence governance characteristics defects of state-owned commercial banks, this paper presents specific policy recommendations, such as Breaking the thought spell that state must hold over 50% shares; actively diversify their shareholder structure; making a clear location of the treasury as investor; drawing a clear boundary between the party committee and the board, between the independent directors and the supervisory members; and establishing the pool of bank independent directors; enhancing the competitiveness of salary levels, implementing stock ownership plan, stock option and other long-term incentives measures.