Identifying Determinants of Branch Performances in Agricultural Bank of China: A Spatial Econometric Approach

摘要

Geographical dimensions and spatial territorial features of China's financial sector have been omitted in the previous literature. Despite the trend of financial globalisation, however, banking services occur at regional or branch levels, still displaying considerable differences from one to another. This leads to the need for better understanding of spatial territorial performances of China's banking industry. We focus the investigation on the ABC from 1997 to 2011 due to the data availability. The results of Moran's I tests clearly indicate that the spatial autocorrelation exists significantly. These results also highlight spatial effects cannot be ignored. There will be bias if the econometric model excludes spatial effects. Thus, it is important to apply spatial econometric methods that consider the possibility of spatial effects to obtain more appropriate empirical results. Previous studies related to China's banking industry have never taken the impacts caused by spatial association effects and the urbanisation into account. It would be the first research to evaluate performances of one of China's largest banks at branch level with empirical evidences obtained from employing a spatial econometric model and by underlining the impacts of factors related to urbanisation. Our empirical results assist management in establishing branches goals, evaluating performances and planning new locations. Spatial lag and error models are employed to produce a set of equations that effectively identify how urbanisation and other factors affect various dimensions of branch performances. Spatial econometric models are the first time to be applied to identify the determinants of bank branch performances, particularly in the case of the mainland China. It reveals that the models are useful management tools in allocating resources between the branches to achieve higher efficiencies. Empirical results indicate that spatial effects and urbanisation have statistically significant impacts on branches' performances. Interestingly, the ABC was resurrected to support rural economic development in 1979, however empirical evidence indicate that its performances were significantly and negatively related to agricultural businesses of rural areas but were highly and positively related to the service industry of populated urban areas. This signals that the ABC has evolved from a state-owned specialised bank to a listed commercial bank.