Dissertation
Dissertation > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Financial organizations, banks > Commercial banks ( specialized banks )

Research on the Relationship between Financial Disintermediation and Commercial Bank’s Operating Performance

Author PengYang
Tutor RenSenChun
School Anhui University of Finance
Course Finance
Keywords financial disintermediation commercial banks operatingperformance panel cointegration test
CLC F832.33
Type Master's thesis
Year 2012
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With China’s financial market development and the constant expansion of direct financing, Commercial banks are facing increasing challenges from financial markets and non-bank financial institutions. Financial disintermediation is becoming apparent with lot of financing around the commercial banks and other deposit-taking institutions. Then, does the trend of financial disintermediation in China have formed at the present stage? If it has formed, what characteristics does it have? How does financial disintermediation impact commercial banks operating performance? And now what measure relationship does China’s financial disintermediation and commercial banks operating performance have? All of these should lead to the attention of theory and banking practitioners.Firstly, this paper systematically describes the generated motivation of financial disintermediation and its mechanism of action of commercial bank operating performance, based on the theory of financial intermediation and the theory of core competence and so on. Secondly, the paper examines the trend of financial disintermediation empirically through financial disintermediation index system and the measurement, since the establishment of China’s capital market. And it measures the operating performance levels in the trend of financial disintermediation using the method of DEA. Finally, an empirical study is given about the relationship between the financial disintermediation and commercial banks’operating performance, using panel cointegration tests and panel regression analysis.China’s financial disintermediation trend has been formed between1992and2009, and the trend is increasingly evident. The ratioes of financial intermediaries, which are non-financial sectors divided by the financial sector and it divided by banking sector, both show downward trends. But non-financial sector assets side of the degree of disintermediation is higher than the liability side. Empirical studies of the relationship of financial disintennediation and commercial bank performance have found that, the formation of the trend of China’s financial disintermediation has a negative impact on commercial bank performance at this stage. In other words, both directions have negative impacts on operating performance of China’s commercial banks although they are different. The negative impact of non-financial sector assets side of financial disintermediation on operating performance of commercial banks is significantly higher than liability side.Therefore, China’s commercial banks should attach great importance to the adverse impact of financial disintermediation on operating performance, and adjust business structure and profit model actively, increase the innovation of financial products and services constantly, improve their core competitiveness and overall management level.

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