EMPIRICAL FINANCIAL DETERMINANTS OF PUBLIC LISTED BANKS PERFORMANCE IN CHINA

Abstract

The global financial crisis in year 2008 was triggered by the easy money, where bank took excessive risk by giving up sub-prime loan to satisfy the insatiable thirst for more profitability. Post global financial crisis sees a more stringent guidelines and rules set by People’s Bank of China agency with holding bank’s reserve and prohibiting excessive risk taking, banks’ performance is put on a important position and the research on the financial determinants of banks’ performance become the primary task. As suggested by prior studies, with more restrictions and covenants, the banking facility will be pricier. Therefore, the focus on this study is to identify the financial determinants that have a significant influence on public listed bank’s performance in China. A descriptive and correlation study is conducted using panel data. A total of 14 state-owned public listed banks under study scope in China and data is collected from banks annual report during the period year 2013 to year 2017. The empirical findings indicated that loan-to-deposit rate (LDR) and non-performing loan ratio (NPLR) are significant determinants which are negatively related to listed banks’ performance in China. Meanwhile, current ratio is not significant related to listed bank’s performance in China. In conclusion, it concluded that liquidity risk has a significant negatively influence on listed banks performance in China. Thus, based on the analysis results, this research suggested that PBOC should enhance the capacity in liquidity risk analysis and loan administration while the regulatory authority should pay more attention to banks’ compliance to relevant provisions of the listed banks.