Performance Evaluation of Financial Holding Companies

As reforms such as interest rate liberalization have deepened, the profitability of some traditional commercial banks has declined, giving rise to the management problem of how to maintain continuous improvement in their operating performance. This book takes a Chinese financial holding group as the research object, focusing on the issue of operating performance evaluation, exploring the evaluation methods, and providing suggestions for improvement. This research is supported by real data, using factor analysis to conduct an empirical study on the operating performance evaluation of 13 companies, and conducting case analysis on 3 typical companies. The data source is the annual reports of the companies from 2014 to 2018, and 15 operating indicators are selected for the evaluation, with the introduction of the economic value-added model to establish and empirically analyze the corporate performance evaluation model. The empirical results and research hypotheses are verified respectively by cluster analysis and chi-square test models. Research result shows that the Chinese bank-type financial holding groups have scale economy effects, and the diversified operation has promoted the improvement of operating performance. It is proposed that the transformation of traditional banks to comprehensive operation is an important strategic choice, and six aspects of management suggestions are put forward, including promoting corporate governance at the group and subsidiary levels, establishing a business synergy mechanism and a comprehensive risk management system, improving the level of digital and intelligent operations, and accelerating the training of comprehensive financial talents.

The connotation and concept of financial holding groups are discussed in this chapter, the main types and characteristics are sorted out, the supporting theories of financial holding groups, including economies of scale, economies of scope, synergy effect and decentralized risk effect are reviewed and the recent research on business performance are introduced. These theories will be used for empirical research and analysis of the business performance of Chinese banking financial holding groups.

In recent years, the world economic growth has slowed down, China’s economic growth has changed from high-speed growth to medium–high growth, financial reforms such as interest rate marketization and capital marketization have been further promoted, the proportion of direct financing has gradually increased, finance and technology have been deeply integrated, financial management and investment of enterprises and residents have diversified, and the profit growth rate of traditional banks has declined. According to the development experience of financial institutions in Europe and America, integrated operation of financial institutions is an important way to cope with macroeconomic changes, diversify customer needs, and enhance profitability and risk resistance. Some domestic financial institutions have held various financial licenses through establishment, merger and acquisition, and transformed into financial holding groups.

Performance evaluation of financial enterprises based on the operating characteristics of the financial industry is a part of comprehensive evaluation. DuPont Analysis, Wole Scoring Method, Factor Analysis Method, CAMELSS and GYROSCOPE are used in the performance evaluation process. At present, domestic scholars mainly conduct performance evaluation research on domestic commercial banks through factor analysis method and other methods but have not conducted evaluation on other financial institutions such as financial holding groups.

According to the theories of scale economy, risk diversification and scope economy, hypotheses of the relationship between integrated operation and profitability, risk offset, cost control, and operation performance are put forward in this research with the combination of research documents of previous scholars.

Taking China’s bank-type financial holding groups as research subjects, this book draws lessons from the latest research on financial holding groups based on the relevant theories and adopts the factor analysis method as the research method of operating performance while carrying out modeling and data analyses. This chapter summarizes the main conclusions of the research on the performance evaluation of China’s financial holding groups, discusses the contribution and meaning of this book, sums up the practical significance for management, points out the limitations of this research, and gives an outlook on the direction for future research.