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KEYWORDS
Capital structure,
Liner relationship,
Listed commercial banks,
Profitability
ABSTRACT
Based on the annual report data of 13 listed commercial banks from 2009 to 2011, this paper studies the impact of capital structure of China's listed commercial banks on profitability. The result indicates that return on equity (ROE) has a significant negative linear relationship with the proportion of the largest shareholder, capital adequacy ratio, non-performing loan ratio and loan-to-deposit ratio, and has a significant positive linear relationship with the proportion of the top five shareholders and the proportion of supplementary capital to core capital, and has no significant linear relationship with the nature of the largest shareholder and asset scale. At the end, we propose our solutions to the banks based on the results and their current situation.
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(ProQuest: ... denotes formulae omitted.)
1 Introduction
Since China's accession to the WTO, with the rapid and steady development of the domestic economy, banks have made great progress in scales, profitability and risk resistance ability. Meanwhile the competition in banking has become increasingly fierce. Specifically, at the end of the year of 2006, with the full opening of China's financial markets and the entrance of a large number of foreign banks into the domestic market, China's banking have to face the competition from all around the world. How to win in the competition is one of the practical problems faced by each bank. As for commercial banks, profitability directly reflects the ability of management, risk control and sustainable development. Therefore, China's commercial banks should continue to enhance their profitability in order to remain an invincible position in the competition. According to the modern theory of capital structure such as MM theory, Trade-off theory, Agency theory, Pecking order theory and so force, capital structure can affect the cost of capital and governance structure, thereby affecting operating performance. Specific to the banking, the impact of capital structure of commercial banks on profitability are mainly reflected in two aspects: on one hand, there is a direct impact on the profitability by affecting the cost of capital; on the other hand, there is an indirect impact on the profitability by affecting governance structure. From the capital adequacy ratio requirements that agreed in Basel II,...