Banks’ Cost of Equity in China: Empirical Analysis Based on the CAPM
The cost of equity is a significant benchmark for banks’ decision-making on capital, and also an important component for the estimation of banks’ WACC. In this paper the CAPM is employed to estimate the beta factor and the cost of equity of ten major Chinese banks. Our empirical analysis suggests that, CAPM could be appropriate for estimation of the cost of equity for banks in China, and the beta factor could, to some extent, reflect the differences in performance and risk-taking among banks. Several conclusions have been drawn as following: at present, the annual real costs of equity for banks in China range from 8 percent to 11 percent, higher than that of banks in developed countries; the ROEs for most banks have been higher than the cost of equity estimated, meaning that banks’ earnings not only could compensate investors’ expected returns, but also raise the economic values of banks themselves. Above all, our research will lay the foundation for further estimation of the WACC for banks in China, and also provide a new perspective for the analysis on the impacts of the reform of international capital regulation under the way on Chinese banking sector.
Duan Xiwen Zhao Xijun Wang Shengbang Wang Danyun
School of Finance,Renmin University of China,Beijing,P.R.China,100872 International Department,China Banking Regulatory Commission,Beijing,P.R.China,100140
国际会议
The 7th International Conference on Innovation and Management(第七届创新与管理国际会议 ICIM 2010)
武汉
英文
1248-1253
2010-12-04（万方平台首次上网日期，不代表论文的发表时间）