Abstract
With the development of financial mixed operation, in order to enhance the financial competitiveness, more and more countries are accelerating the pace of from separate operation to mixed operation. Except bringing the advantages, financial holding company has also faced great challenges at the same time. Therefore, establishing the corresponding mixed supervision system and improving the competitiveness of the financial holding company have become the most important tasks for China’s financial industry. Taking the Chinese CITIC International Financial Holdings Limited as an example, we focus on comparing economies of scale, economies of scope as well as the study of stability and risk, based on theoretical analysis and empirical analysis methods. The results show that most of the China Financial Holding Company Limited did not reach the greatest economies of scale and scope because of the restrictions on their own management and management experience. Secondly, the higher risk of securities will not increase the risk of major financial institutions such as banks. Thirdly, the risk of subsidiaries in financial holding companies is relatively low, compared with others in separated operation. In addition, we analyze the transmission mechanism and internal transaction risk of the financial holding company, innovatively propose “Incentive Conflict Concept” in subsidiary of internal and external risk control. Finally, the paper suggests that the financial holding companies should attach great importance to internal risk control, improve their management and integrated resource ability. More importantly, the external supervision mechanism needs to improve supervision mechanism design for the mixed supervision, as much as possible to achieve regulatory objectives of incentive compatibility.
Highlights
In early 1990s, China used to implement the mixed financial operation
Taking the Chinese CITIC International Financial Holdings Limited as an example, we focus on comparing economies of scale, economies of scope as well as the study of stability and risk, based on theoretical analysis and empirical analysis methods
The results show that most of the China Financial Holding Company Limited did not reach the greatest economies of scale and scope because of the restrictions on their own management and management experience
Summary
In early 1990s, China used to implement the mixed financial operation. there were economic bubbles, which gradually continued to expand and internal risk transmission in the whole financial system caught the attention of regulator at the impact of domestic and aboard economic environment. If we expect to adapt to the pace of mixed operation as soon as possible and improve the systems and development environment of financial holding companies, we urgently need to conduct an in-depth study of the real operation including the stability and risk, so as to provide guidance for the governance and development of financial holding companies in the step. This paper innovatively fills the gap of empirical research, mainly based on the analysis of financial statements, taking China CITIC International Financial Holdings Limited as an example, discuss the stability and risk of its real operation, and provide reference value for the improvement of China’s financial holding company management system and regulatory system
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