Upload
others
View
5
Download
0
Embed Size (px)
Citation preview
THE INFLUENCE OF MACROECONOMICS
FACTOR TOWARDS PROFITABILITY
By
Li Jian
ID No: 014201500185
A Skripsi presented to the
Faculty of Business President University
in partial fulfillment of the requirements for
Bachelor Degree in Management
April 2019
II
PANEL OF EXAMINERS
APPROVAL SHEET
The Panel of Examiners declare that the skripsi entitled “ The Panel of
Examiners declare that the skripsi entitled "THE INFLUENCE OF
MACROECONOMICS FACTOR TOWARDS PROFITABILITY"
that was submitted by LiJian majoring in Management from the Faculty
of Business was assessed and approved to have passed the Oral
Examination on 10 April 2019.
Liswandi, S.Pd., M.M., Ph.D
Chair- Panel of Examiners
Pandu Adi Cakranegara, S.E., M.S.C., F.I., M.B.A., PFM.
Examiner I
Purwanto, ST. MM
Examiner II
III
DECLARATION OF ORIGINALITY
I declare that this skripsi, entitled"THE INFLUENCE OF
MACROECONOMICS FACTOR TOWARDS
PROFITABILITY"is to the best of my survey, it is an original work
that has not yet been used, whether in whole or in part, to obtain a degree
at a university other than the Presidential University.
Cikarang,28 March 2019
Li Jian
IV
ABSTRACT
This research aimed to examine the determinants of the profitability of RMB in China
between 2012 and 2018 and some specific technical analysis. The data used in this
study comes from China Eastern Fortune Network and China National Data Network.
By using panel data and spss to quantitatively detect and analyze this research, it is
concluded that interest rate, exchange rate,gross domestic product and money supply
have an impact on RMB earnings of 48.1%,The remaining 51.9% is due to factors not
studied in the study. In terms of variables, exchange rate and GDP have negative
impact on RMB earnings, The negative impact of the exchange rate on the profit of
RMB relative to GDP is relatively obvious. Although the negative impact of GDP on
RMB is relatively insignificant,The impact interest rates and money supply have a
positive impact on the profitability of the RMB,The positive impact of interest rates
on RMB is less obvious than money supply, and the positive impact of money supply
on RMB is very small.
Keywords: Interest rate,Exchange rate,GDP,Money Supply,RMB
V
ACKNOWLEDGEMENT
I am very happy to go abroad to go to college at the Presidential University. I want to
thank the University President for letting me get my bachelor's degree. I am also
particularly grateful to help and support my family, friends, and teachers in the skripsi
process. Imagine that without their understanding, help, and support, the completion
of the thesis will become an imagination. The people I want to thank are:
1.Mr. Purwanto, my thesis supervisor, thank you for your guidance on my paper,
whether it is knowledge or skill, or if you are writing a paper, you will give me
selfless help and understanding. Thank you for your advice and various guidance.
Your greatest help has enabled me to complete my thesis.
2.Thanks to the understanding and support of my family, I need patience in writing
the paper. When I am in a hurry, they always give encouragement, comfort and
confidence. My parents are my strongest backing.
3.Thanks to our friends and classmates in 2015, for their help, for the writing of the
papers, and for my help and support during college.
Cikarang, March, 2019
My deeply gratitude
LiJian
VI
TABLE OF CONTENTS
PANEL OF EXAMINERS APPROVAL SHEET ....................................................... II
DECLARATION OF ORIGINALITY ........................................................................ III
ABSTRACT ................................................................................................................. IV
ACKNOWLEDGEMENT ............................................................................................ V
TABLE OF CONTENTS ............................................................................................. VI
LIST OF FIGURES ...................................................................................................... X
LIST OF TABLES ....................................................................................................... XI
LIST OF ABBREVIATION ....................................................................................... XII
CHAPTER I INTRODUCTION .................................................................................. 13
1.1 Background of the Study ................................................................................ 13
1.2 Problem Identification .................................................................................... 16
1.3 Statement of Problem ...................................................................................... 16
1.4 Research Objective ......................................................................................... 17
1.5 Significance of the Study ................................................................................ 17
1.6 Scope and Limitations of the Study ................................................................ 18
1.7. Definition of Terms ........................................................................................ 18
CHAPTER II LITERATURE REVIEW ...................................................................... 20
2.1 China's banking market ................................................................................... 20
2.2 Macroeconomics ............................................................................................. 20
VII
2.2.1 Interest rate............................................................................................ 20
2.2.2 Exchange rate ........................................................................................ 21
2.2.3 Gross domestic product......................................................................... 21
2.2.4 Money supply........................................................................................ 22
2.2.5 Return on assets .................................................................................... 23
2.3 Previous Research ........................................................................................... 24
2.4 Research Gap .................................................................................................. 29
2.5 Theoretical Framework ................................................................................... 30
2.6 Hypothesis....................................................................................................... 31
CHAPTER III RESEARCH METHOD ...................................................................... 32
3.1 Research Method ............................................................................................ 32
3.2 Research Framework ...................................................................................... 32
3.3 Sampling Design ............................................................................................. 33
3.3.1 Population ............................................................................................. 34
3.3.2 Size of Sample ...................................................................................... 35
3.4. Data collection method .................................................................................. 36
3.5 Operational Definitions ................................................................................... 36
3.6 Descriptive statistical analysis ........................................................................ 37
3.7 Classical Assumption Test .............................................................................. 38
3.8 Multiple Regressions Analysis ........................................................................ 42
3.9 Hypothesis Test ............................................................................................... 43
VIII
3.9.1 F - Test .................................................................................................. 43
3.9.2 T - Test .................................................................................................. 44
3.10 Coefficient of Determination (R2) ................................................................ 45
CAPTER IV ANALYSIS OF DATA AND INTERPRETATION ................................ 47
4.1 Company Profile ............................................................................................. 47
4.2 Descriptive Analysis ....................................................................................... 50
4.3 Data Analysis .................................................................................................. 51
4.3.1 Normality Test....................................................................................... 51
4.3.2 Autocorrelation test ............................................................................... 53
4.3.3 Multicollinearity Test ............................................................................ 54
4.3.4 Heteroskedasticity Text ......................................................................... 55
4.3.5 Measuring coefficient ........................................................................... 56
4.4 Hypothesis Test ............................................................................................... 57
4.4.1 F-Test .................................................................................................... 57
4.4.2 T-Test ..................................................................................................... 58
4.5 Coefficient of Determination (R2)................................................................... 59
4.6 Interpretation of Result ................................................................................... 60
CHAPTER V ............................................................................................................... 64
CONCLUSIONS AND RECOMMENDATIONS ....................................................... 64
5.1 In conclusion ................................................................................................... 64
5.2 Recommendations ........................................................................................... 65
IX
REFERENCES ............................................................................................................ 67
STATISTICAL RESULT ............................................................................................. 71
APPENDIX-2 .............................................................................................................. 75
RAW DATA ................................................................................................................. 75
X
LIST OF FIGURES
Figure 1.1:Growth USD vs.Chinese Yuan in 2008-2018 ............................................. 13
Figure 1.2 Money supply growth ................................................................................. 14
Figure 1.3 China GDP growth ..................................................................................... 15
Figure 2.1 Theoretical Framework............................................................................... 30
Figure 3.1. Research Framework ................................................................................. 33
Figure 4.1 Histogram ................................................................................................... 52
Figure 4.2 Normal P - P Plot of Regression Standardized Residual ............................ 53
Figure 4.3 Scatter plot of Heteroskedasticity ............................................................... 56
XI
LIST OF TABLES
Table 2.1Previous research related to the RMB ........................................................... 24
Table 3.1 Listed Chinese bank ..................................................................................... 34
Table 3.2 Operational Definitions ................................................................................ 36
Table 3.3 Multicollinearity Test ................................................................................... 42
Table 4.1 Descriptive Statistics .................................................................................... 50
Table 4.2 Model Summaryb ......................................................................................... 54
Table 4.3 Multicollinearity Test Result ........................................................................ 55
Table 4.4 Weighted Statistics ....................................................................................... 56
Table 4.5 ANOVAa ...................................................................................................... 57
Table 4.6 Coefficientsa ................................................................................................. 59
XII
LIST OF ABBREVIATION
IR=Interest rate
ER=Exchange rate
GDP = Gross domestic product
MS=Money supply
ROA=Return on Assets
13
CHAPTER I
INTRODUCTION
1.1 Background of the Study
In 2008, when the United States caused a global financial crisis due to subprime
loans, many countries adopted a dollar-linked exchange rate system, and thus
depreciated against the dollar. China has also maintained a two-year exchange rate
of RMB against the US dollar, and has stabilized at 6.800. Since 2005, the Chinese
government has begun to implement the reform of the exchange rate system. On
June 19, 2010, China continued to reform in order to speed up the formation of the
RMB exchange rate rules, and created rules and regulations for floating RMB
exchange rates in the market and supply.Since the announcement, the RMB has
continued to appreciate against the US dollar, from 6.800 in June 2010 to 6.200 in
April 2013. Then, from June 2013 to July 2015, the exchange rate of the RMB
against the US dollar remained at 6.150,the US dollar began to appreciate.
Figure 1.1:Growth USD vs.Chinese Yuan in 2008-2018
Source: www.kitco.com , 2018
China's forward foreign exchange market sprouted in April 1997, and the bank of
China began to conduct long-term foreign exchange settlement as a pilot. In April
2003, China's four major banks, ICBC, Agricultural Bank, Bank of China and
Construction Bank, launched far. In the period of February 2005, China has opened
the forward settlement and sales projects of Bank of Communications, China
14
CITIC Bank and China Merchants Bank.
China forward foreign exchange settlement project at the beginning and sales use
the comprehensive position management system for settlement and sale of foreign
exchange and the realization system of collection and payment,that is the long-term
foreign exchange settlement and sales position can no longer be flat in the spot
market,making the arbitrage interest rate parity impossible in China (JieShan,
2018).
Figure 1.2 Money supply growth
Source: www.tradingeconomics.com , 2018
China's M2 money supply, including broad money in circulation and all deposits,
increased by 8.1% compared with the same period in 2017 to 182.67 trillion yuan
in December 2018, compared with a record low of 8% in November. The change is
small and there is no market expectation. 8.2% ahead. M1 money supply increased
by only 1.5% year-on-year to RMB 55.17 trillion, the lowest level since January
2014. M1 reflects the strength of the company's cash position and whether it will
raise funds for possible future investments.
China's money supply M2 averaged 610.334 billion yuan, reaching an all-time high
of 182.67 billion yuan in December 2018, and reached a record 584.10 billion yuan
in January 1996, From 1996 to 2018 (ShuiZhu, 2016).
15
The previous national economic censuses have revised the previous national
economic data, especially gross domestic product. In October 2018, the National
Bureau of Statistics of China released a GDP of 650.899 billion yuan in the first
three quarters of 2018, which was 6.7% higher than the same period last year.
Looking at the quarter, the first quarter increased by 6.8%, the second quarter
increased by 6.7%, and the third quarter increased by 6.5% (JieShan, 2010).
Figure 1.3 China GDP growth
Source: www.tradingeconomics.com , 2018
National Bank of China declared that China's comprehensive national strength has
been continuously improved since the change of the RMB policy. According to the
exchange rate theory and China's actual situation, the important factors affecting
the RMB forward exchange rate should be Sino-US spreads, foreign exchange
reserves, foreign direct investment, inflation and economic development have
pushed the RMB to the world.
The China’s government has agreed to China CITIC Bank,China Merchants Bank
and Bank of Communications to open forward foreign exchange settlement
projects,In February 2005.From June 2013 to July 2015, the exchange rate of
Exchange rate of RMB and US dollar exchange remained at 6.150, after the Asian
economic crisis.It is conducive to the improvement of the RMB exchange rate
formation mechanism and the ability to increase the price discovery of the spot
16
exchange rate (Miao, 2013).
1.2 Problem Identification
The reform of the RMB mechanism has brought development to China's banking
industry. At the same time, it has also brought a series of problems. The renminbi
going global has led to the rapid development of the Chinese banking industry. The
reform mechanism is slow, which limits the improvement of the banking industry.
The profitability of the renminbi has been fluctuating. Due to the rapid
development of the Chinese banking industry to the world, the internal problems of
banks have led to profit instability, and the exchange rate has changed significantly.
This series of problems shows the banking industry and the issue of RMB
profitability. It is also the biggest problem for China’s RMB to go global.
This research will help China improve the management level of the Bank of China,
improve the commercial banking system, promote domestic banks to enhance their
competitiveness, catch up with the developed level of the Bank of China,
international banking, and set up branches abroad. Expand global business and
improve the mechanism of RMB profitability.
1.3 Statement of Problem
The problems identified and will be examined within this research are put together
into questions as follows:
Is there a partially significance influence of:
1. Interest rate toward return on assets in the bank of China?
2. Exchange rate toward return on assets in the bank of China?
3. Gross domestic product toward return on assets in the bank of China?
4. Money supply toward return on assets in the bank of China?
17
5. Is there simlutaneously significance influence of interest rates,exchange
rate,GDP, money supply toward return on assets in the bank of China during
period of 2012-2018?
1.4 Research Objective
This research is conducted based on some variables that need to be further research
such as interest rate,exchange rate,GDP, money supply toward debt to ROA in
China bank. This research is purposed to attain research objectives, as follows:
To find out the partially significance influence of:
1. Interest rate toward return on assets in the bank of China.
2. Exchange rate toward return on assets in the bank of China.
3. Gross domestic product toward return on assets in the bank of China.
4. Money supply toward make sure to return on assets in the bank of China.
5. Simlutaneously of interest rates,exchange rate,gross domestic product ,money
supply toward return on assets in the bank of China.
1.5 Significance of the Study
This research is a basic research in China and the world's financial sector. The
research is to reduce China's financial risks. In the shrinking of financial markets,
economic development and globalization, exchange rate fluctuations are becoming
more frequent, and exchange rate changes are against the world. The economy and
the Chinese economy and people's lives have had a major impact.
1. China's banking industry
This research will provide banks with high-level research programs on bank
performance, which in turn will improve the bank's assets.
2. Academic community
18
The study is expected to complement the existing academicians on bank return on
assets issues and student knowledge about banking and finance,
2. Researcher:
The purpose of this study is to complement and gain a comprehensive
understanding of the application of several factors in the bank return on assets
issue and to become a prerequisite for completing a bachelor's degree at the
President's University.
4. Next researcher
This study is expected to receive additional extensive reference to the following
analyst studies to assess the factors of the bank return on assets.
1.6 Scope and Limitations of the Study
1. Scope:
The objective of this research was to determine the impact on the RMB, from the
following aspects, bank interest rates, gross domestic product, money supply,
bank return on assets, through these years of data, analysis of RMB issues. These
data consist of data from several Chinese banks in 2012 to 2018 years.
3. Limitations:
The limitation of this research is that it is not possible to conduct a unified study
of all banks in China.Only a part of it can be extracted for analogy.This
conclusion does not represent all Chinese banks, and his data is only in 2012 to
2018 years.
1.7 Definition of Terms
1. Interest rate:
Interest rate: Refers to the ratio of interest funds to borrowed funds for a certain
19
period of time (Miao, 2013).
2.Exchange rate:
Exchange rate: Refers to the RMB against foreign currency is the external value
of the RMB. The state management of foreign exchange is based on the principle
of independence and unity, and formulates and adjusts according to the domestic
and international price comparison level and the fluctuation of the international
financial market exchange rate (ShuiZhu, 2016).
3.Gross domestic product
Gross domestic product: Refers to the accumulation of all products and services
manufactured by a country (or region) at a certain time. It can generally express
indicators of the state (or region) of a country’s economic situation (JieShan,
2010).
4.Money supply:
Money supply: Refers to the total currency of a country serving economic and
social operations at a point in time. It has two components: the cash currency and
the deposit currency issued by the central bank’s financial institution (WenPing,
2011).
5.Return on assets
Return on assets: Refers to measure of how much net profit is generated per unit
of assets. It measures the profit from each dollar of assets.
20
CHAPTER II
LITERATURE REVIEW
2.1 China's banking market
Banks are commercial organizations that provide people with deposits and provide
credit. If people want a loan, they can provide a loan project through the bank.
Because banks play a big role in the stable economy of every national government,
banks are controlled by the state in almost all countries. Many countries have
institutionalized banking rules, according to which the liquid assets owned by banks
are one aspect of current liabilities. In addition to other regulations that protect
liquidity, banks generally still have to comply with the minimum capital
requirements of the Basel Accord (Miao, 2013).
2.2 Macroeconomics
Economics studies a country's total economic output, aggregate demand and total
supply, total national income and composition, monetary and fiscal, population and
employment, factors and endowments, economic cycles and economic growth,
economic expectations and economic policies, international trade and The
discipline of macroeconomic phenomena such as the international
economy.Macroeconomics is a branch of economics that has developed rapidly
since the publication of General discussion of interest, employment and money (Bin,
2013).
2.2.1 Interest rate
Interest rate is an important financial variable in economics. Almost all financial
phenomena, financial assets have more or less links with interest rates.
21
The interest rate determines the amount of interest that a certain amount of
borrowing capital will receive in a certain period of time. The factors affecting the
interest rate mainly include the marginal productivity of capital or the supply and
demand of capital. There is also the length of time that the promise is delivered to
the currency and the degree of risk it bears (Miao, 2013).
The interest rate is the percentage of the amount of borrowed money that the lender
borrows after borrowing (usually the interest rate is a percentage). Interest rates are
generally calculated in one year and are called annual percentage ratios. Borrowed
items include cash, used goods and industries such as cars and buildings (Miao,
2013).
2.2.2 Exchange rate
Exchange rate refers to the ratio between one currency and currency, or the price of
one currency for another currency,It is to facilitate the exchange of currency
between merchants or people between countries (Bin, 2013).
Fluctuations in exchange rates The mutual trade of the entire country has a
regulatory role. Under certain preconditions, by depreciating the national currency,
the exchange rate will be lowered at this time, and it will play a significant role in
accelerating projects that restrict exports and exports. On the other hand, currency
appreciation, which promotes the rise of the exchange rate, has a crucial role in
import and export.
Exchange rate appreciation rate = (new exchange rate / old exchange rate -1) * 100
2.2.3 Gross domestic product
Refers to all resident units of a country (or region). The total all service and product
values produced during a certain period of time is often considered as an indicator
to measure the economic status of the country (or region).
22
Gross domestic product is the main indicator of national economic calculation and
the main indicator for calculating the overall economic situation of a country,but it
is not suitable for measuring the economic situation of a region or city, because
each city's gross domestic product is transferred to higher levels or countries.So the
wealth left in each city is different (JieShan, 2010).
Gross domestic product (Y) is the total of investment (I), consumption (C),net
exports (X – M) and government spending (G).
2.2.4 Money supply
Money supply: Refers to the total currency of a country serving economic and
social operations at a point in time. It has two components: the cash currency and
the deposit currency issued by the central bank’s financial institution (WenPing,
2011).
The central bank of the world's central currency is not exactly the same, but the
basic basis for the division is consistent, that is, the size of liquidity. The so-called
liquidity refers to an asset that can be changed into cash or commodities at any time,
without any loss to the holder. The degree of liquidity of the currency is different,
and the number of turnovers in circulation is different, and the purchasing power of
the currency is Its impact on the entire social and economic activities is also
different (Fan, 2012).
M0: cash in circulation;
M1: M0+ corporate demand deposit + agency group army deposit + rural deposit.
M2: M1+corporate deposits with regular deposits + foreign currency deposits +
trust deposits+urban and rural residents' savings deposits
M3: M2+ financial bonds + commercial papers + large transferable certificates of
23
deposit.
M4: M4 = M3 + other short-term current assets.
M1 is a so-called narrow money amount, which is highly mobile and is the key
control object of the national central bank. M2 is the broad money amount, the
difference between M2 and M1 is quasi-currency, and the liquidity is weak; M3 is
established considering the status quo of financial innovation, and has not been
estimated yet.
2.2.5 Return on assets
Return on assets:return on assets is an indicator used to measure how much net
profit is generated per unit of assets. It measures the profit from each yuan of assets
(JunZheng, 2013).
The return on assets index combines the relevant information in the balance sheet
and profit and loss statement, which is a concentrated expression of the bank's
ability to use its entire funds to obtain profits.
24
2.3 Previous Research
Table 2.1Previous research related to the RMB
NO Author /Year /Title Methods Results
1 WangWenping/2011/An
Empirical Study of the
Relationship between
RMB Exchange Rate and
Stock Price
-Quantitative
-Analysis; empirical
part
-.Johansen
cointegration test,
error correction model
and Granger causality
test were used for
analysis.
a.The transmission
intermediary between
the RMB exchange rate
and the stock price has
interest rates, trade
balances, and capital
flows.
b.Dynamic and
psychological
expectations. The trade
balance is the main way
to influence the
interaction between the
RMB exchange rate and
the stock market price.
c.Play a role. But the
mediating role of
interest rates and
capital flows has not
been fully realized.
2 Zhangxiang/2010/The
flexibility of RMB
exchange rate and the
effect of China's monetary
policy
The short-term
constraint method
proposed by Bernanke
(1986) was used to
identify and estimate
the SVAR model.
a.The results of the
SVAR model estimation
show that the supply of
Chinese currency is
growing.
b.Each percentage point
increase in the rate
change will cause the
RMB exchange rate to
be proportional to the
25
value of the exchange
rate.
c.Under the
marketization
assumption, there is still
a large gap in the
flexibility of the
exchange rate.
d.Under the dynamic
simulation of the strong
exchange rate flexibility
of the RMB.
e.Into China's economic
growth, but it will also
bring inflationary
pressures.
3 ChangjunZheng /2013/The
empirical research of
banks' capital buffer and
risk adjustment decision
making: Evidence from
China's banks
-Quantitative
-14Sample
-.independent
Bank size
ROA
Loan loss
The ratio of new
provision /total assets
dependent riskit−1
a. There will be a
positive correlation
between the risks and
capital changes that can
be made according to the
capital buffer theory.
b. b. The data for the
dependent variable
bufit-1 is very obvious
and the same as the
prediction. The value in
the interval [0, 1] shows
the magnitude of the
capital change. The
speed of the change
shown in Model I is the
maximum measured in
the study Δriskit.
26
5 Yangfan/2012/Research on
the Real Exchange Rate of
RMB
-the concept,
classification and
measurement of the
actual exchange rate;
-the actual exchange
rate movement and the
source of the impact;
-the equilibrium real
exchange rate
a.Real Exchange Rate
refers to a country after
a nominal exchange
rate adjustment.The
ratio of foreign relative
price levels.
b.based on the
discussion of the
concept, classification
and measurement
methods of exchange
rate.
c.in the end, we will
comprehensively
examine the external
real exchange rate of
the RMB during the
period from 1985 to
2005.
27
6 Mengbin /2013 /Empirical
Study on the Reasons of
RMB Real Exchange Rate
Fluctuation
-Survey
Quantitative
economics
Mature quantitative
model analysis
method-
-.An empirical
analysis framework
used by many foreign
scholars founded by
Clarida and Gali,
-.Structural
Cointegration
Test,Unit Root
Test,Vector
Autoregressive Model
(VAR), Impulse
Response Function
Analysis and
Variance
decomposition
a.Internal shocks,
especially demand
shocks, are the main
source of real exchange
rate fluctuations.
b.the impact of external
shocks on real
exchange rate
fluctuations is
relatively small.
7. LiJieShan /2010/The Study
of Countermeasures About
Renminbi Exchange Rate
-Analyze the
influence of GDP
growth on exchange
rate - analyze its main
factors,
-example10
a.In the face of strong
expectations of RMB
appreciation and
speculative short-term
capital inflows,
b.In a short period of
time, it is necessary to
maintain the stability of
the RMB exchange rate,
the volatility of the RMB
exchange rate, and the
fluctuation of the
effective regulatory
28
floating rate.
c.The necessary
requirements for
maintaining and using
the independence of the
RMB rules.
8.
Sunyong/2012/The
Statistical Research on the
Reasonable Interval of the
RMB Exchange Rate
Fluctuation
-48Sample
-Combine theoretical
analysis with
empirical analysis
- based on exchange
rate
- According to the
characteristics of the
theoretical model.
The method conducts
empirical analysis.
We believe that labor
productivity is an
important basic
economic factor
affecting the RMB
exchange rate.
The coefficient of sex
is. 0.38, that is, for
every 1 percentage
point increase in labor
productivity, the RMB
exchange rate will
appreciate by 0.38
percentage points.
Explain that the
improvement of labor
productivity will
enhance the
competitiveness of
China's products in the
international market, so
that China's trade
balance
9. Zhengshuizhu/2016
/Research on the Reform
of RMB Exchange Rate
Formation Mechanism
--55Sample
a.Comprehensive
induction method.
Through the reading
and understanding of a
large number of
related books,
a.The background
and significance of
the reform of
exchange rate
formation
mechanism are
briefly described.
29
literature and research
results, the content of
the research needs of
this research is
summarized and the
understanding of the
proposed questions is
deepened.
b.Theory is linked to
reality. Applying
relevant research on
the reform of the RMB
exchange rate
formation
b. The reasons and
specific operational
methods for
exchange rate
formation rule are
described.
c.The reasons for
the failure of the
reform of the RMB
exchange rate
formation
mechanism to
achieve the set
goals were
analyzed.
10 WangMiao/2013/Research
on the Impact of RMB
Internationalization on
China's Banking Industry
-Quantitative
-14Sample
-.independent
Bank size
Loan loss
Interest rate
The ratio of new
provision /total assets
dependent ROA
Bank size and interest
have a significant
impact on bank ROA,
and the impact range is
11%.
In other words, within a
certain range, the bank's
interest rate can also
show the bank's profit.
Source: Adjusted by Researcher, 2018
2.4 Research Gap
In recent research, the number of people concerned about the impact of
macroeconomics and RMB earnings has gradually increased. Previous research has
generally focused on the relationship between macroeconomics and attributes.Most
30
researchers only studied the exchange rate fluctuations of the RMB and the risks of
volatility, which in turn affected the profitability of the RMB. There was no direct
study of the RMB's earnings. Having said that, researchers use more comprehensive
study of dependent variables to add more efficient research and fill in the gaps in
previous research (WenPing, 2011).
2.5 Theoretical Framework
This study establishes a theoretical framework through the set of relationships
between these data to illustrate and explain the interrelationship between these
variables. The theoretical framework of this research is described by Figure 2.1.
Figure 2.1 Theoretical Framework
Source:Adjusted by researcher, 2018
According to the theoretical framework of figure 2.1 above, to construct the study.
The researchers will interpret these four independent variables:interest
rate(X1),exchange rate(X2),GDP(X3), money supply(X4), and the dependency
variable is the ROA (Y).
31
2.6 Hypothesis
This assumption is constructed in a variety of ways, but it is usually the result of an
inductive reasoning process in which observation leads to the formation of theory.
This study is used to analyze the factors that affect the current RMB exchange rate
changes (JunZheng, 2012).
Based on this research and analysis, the researchers made the following assumptions:
1. Hypothesis 1: There is a significant influence of interest rate towards ROA in the
bank of China.
2. Hypothesis 2: There is a significant influence of exchange rate towards ROA in
the bank of China.
3. Hypothesis 3: There is a significant influence of GDP towards ROA in the bank
of China.
4. Hypothesis 4: There is a significant influence of money supply towards ROA in
the bank of China.
5. Hypothesis 5: There is a significant influence of interest rate, exchange rate
GDP and money supply towards ROA in the bank of China
simultaneously.
32
CHAPTER III
RESEARCH METHOD
3.1 Research Method
The research method is a tool for researchers to study specific data, and can use
quantitative and quantitative methods,The quantitative method mainly uses
statistical tools to collect and analyze data, mainly to detect data. This means that
researchers can detect variables by detecting the relationship between the data.
These can generally be displayed using tables and graphs. However, qualitative
data is not a number, and the model is generally used. Of the three research
methods, only the hybrid method can clearly predict unexpected results (Bin,
2013).
A qualitative research method that encompasses the behavior of animals and the
reasons for constraining such behaviors. It is usually a common question to expand
the required data in various forms. The purpose of this research is to explore a
problem, not to attempt to find a connection between variables in a data-based
manner. Usually this type of research is very restrictive. After all, it takes time and
price. It is often used as an exploratory study to provide a basis for quantitative
research (Bin, 2013).
The study used quantitative research,All the data in this study are all from the
network, that is, the GDP and money supply data are from China national data
network, the interest rates and exchange rates of the eight banks, and the ROA are
derived from the data published by oriental data network 2012-2018.
3.2 Research Framework
The purpose of this research is to resolve the factors affecting RMB and reasons for
33
investigating the impact of the RMB. Some factors affecting the RMB should
include bank interest rates,exchange rates, GDP, and money supply.
Figure 3.1. Research Framework
Source: Adjusted by Researcher, 2018
Figure 3.1 shows the research steps to answer whether there is interest rate,exchange
rate, GDP, money supply, and the impact in ROA.
3.3 Sampling Design
Sample design refers to road signs or structures, which are preliminary to the
selection of research samples and affect many other types of research. In the
context of nature, researchers want to research, population, or number, and so on.
First, you need to choose a framework to represent the target you are studying, and
then select samples from it, either regular or random. The sample taken can be 50%
34
or 100%. It has some shortcomings because it has some connection with the
population (Miao, 2014).
In this study, researchers used non-probability sampling as a purposeful sampling.
Because this method looks for samples in a strategic rather than random manner,
this sample is suitable for this study. The standard samples for this study are
explained below:
1. All listed banks in China will have financial information on these banks on the
eastnet fortune network.
2. Each of the eight banks publishes the financial statements and basic information
for the year.
3. From 2012 to 2018, the country's GDP will be published on the national data
network.
Based on the above information, this research sample selects the exchange rate,
interest rate, ROA of 8 listed banks owned in China.
3.3.1 Population
In the study of this study, the research population was all from China's interest rate,
exchange rate,GDP and money supply,ROA from eight banks in China.
35
Table 3.1 Listed Chinese bank
No Bank Name Abbrevia
tion
Established
Date
1 Bank of China limite BOC 1912
2 Industrial and Commercial
Bank of China Limited,
ICBC
ICBC 1984
3 China Construction Bank CCB 1954
4 Hua Xia Bank HB 1992
5 China Everbright Bank CO.,
LTD
CEB 1992
6 China CITIC BANK CB 1987
7 Agricultural Bank of China ABC 1951
8 China Merchants Bank CMB 1996
Source: Adjusted by researcher based on the Dong Fang finance website (2018)
3.3.2 Size of Sample
In this study, the researchers used the bank interest rates of eight Chine’s banks, the
exchange rate, and the ROA for a total of seven years. China's national data online
GDP. Considering all the variables from 2012 to 2018, the sample size of this study
is 56, including 8 Chinese banks and seven years of finance. It also includes China's
7-year GDP.
36
The financial information of the above banks comes from the eastern fortune
network, and the GDP comes from the China national data center for a total of
seven years.
3.4 Data collection method
The collection of data is the most important part of this research, and it determines
the key to the success of this research (Fab, 2012).
The data in the thesis research is divided into two categories. First, they randomly
sample and then collect it in person until the data collection is complete, such as
questionnaires.Another way is to go to some financial websites and collect the
collected data on the website, which saves time and has a province.
The study used the second method of data collection. The data was published by the
major banks on the eastern fortune network,other data were released in the China
national data center.
3.5 Operational Definitions
The definition of the operation is how to make it easier for your variables and the
numerical process after analysis to be clearer and the ideas will not be confused
(Miao, 2013).The relationship between the variables is analyzed as shown in Table
3.2:
Table 3.2 Operational Definitions of data
No Variable Definition Formula Measuring
Scale
37
1 Interest rate It refers to the
ratio of the
amount of interest
to the total amount
of borrowed
capital in a given
period of time
(ShuiZhu, 2016).
Interest
amount/principa
l×100%
Ratio
2 Exchange rate It is the ratio or
price of a
country's currency
to another
country's currency
(Yong, 2017).
One country
currency/Another
country
currency×100%
Ratio
3 GDP It is to measure
the speed of a
country’s
economic growth
(JieShan, 2010).
Ratio
4 Money supply It refers to the
amount of money
in circulation at a
certain point in
time (Miao, 2013).
M=B×K
Multiply
Sources: Adjusted by Researcher, 2018 based on Gong Jing Hui (2013)
3.6 Descriptive statistical analysis
Descriptive statistics uses methods to measure and calculate based on individual
variables. These methods have average, maximum, and minimum,and standard
deviation (AiAn, 2013).
Mean is the average of this set of data, and the individual values of the set of data
38
are added and divided by the total number of sets of data. The following is the
calculation of the average (JunZheng, 2013).
Eq.1
Where:
N = number of the observation in current sample
Max and Min are the maximum and minimum values of the series in the current
sample (Jack, 2010).
Standard deviation is a set used to quantify the variation or to decentralize a set of
data values, a lower standard deviation indicates that the data points tend to
approach the average (also known as the expected value), and a higher standard
deviation indicates that the data points are distributed over A larger range of values
(Miao, 2013):
Eq.2
Where :
N = number of observations in the current sample
X = mean of the data
3.7 Classical Assumption Test
The statistical rules of classical hypothesis must satisfy multiple linear regression
analysis.The classical hypothesis test is used to test the relationship between
39
variables. It contains, normality test and linear test, autocorrelation test,
heteroscedasticity test, multicollinearity test, and four methods (JunZheng, 2013).
1. Normality test
Normality test is used to detect whether the dependent and independent variables
are normally distributed and whether they are normally distributed. The regression
analysis is assumed to be that the residual follows a normal distribution, and the
normality test can be completed by graphical analysis and statistical analysis. The
graphical analysis will be tested by histograms and statistical analysis of the Jarque
Bera test (Bin, 2013).
Jarque-Bera is a stastistic test, which is used to test whether the data in this group is
normally distributed.the statistic is computed as:
According to the null hypothesis of the normal distribution, the statistical analysis
of Jarque-Bera has two results. If the result of Jarque-Bera is above the general
level, the data is normally distributed. The general horizontal probability of this
study is α = 5% or 0.05, and the results are as follows:
a. If the probability of Jarque-Bera is >0.05, then the data detected is normally
distributed.
b. If the probability of Jarque-Bera is <0.05, then the data detected is not normally
distributed.
2. Heteroscedastisity test
Heteroscedasticity - the opposite is the same variance - applies to statistics,
especially to time series analysis, linear regression, its role is the variance of the
model or description error for all the different conditions of detection, it is generally
the basic assumption of one of the models The variance is homogenous and the
error of the model is the same (Miao, 2013).
40
In linear regression analysis, the fact that the error of the model (also known as
residual) is not the same variance results in model coefficients using ordinary least
squares (OLS) estimates that are neither unbiased nor model coefficients with the
least variance. Their variance estimates are unreliable In linear regression detection,
if the model value of the least squares prediction is used, not unbiased, and there is
no minimum variance value, then this event is caused by the fact that the residual
and the error are not one variance. The prediction of this variance is not recognized.
3. Autocorrelation test
Autocorrelation is a fundamental feature of research data, in which related objects
are the main cause of correlation between variables. It is the opposite of the
assumption of instance data independence and is the foundation of almost all
general models. It generally exists only between these types of data, provided that
the data is not randomly selected, but is homologous.The formula to calculate
Durbin-Watson test itself is stated as follows (JunZheng, 2010).
The basics for decision making in auto-correlation test as stated by
Santoso (2010) are:
a)If the value of Durbin-Watson < -2 indicates positive autocorrelation.
b)If the value of Durbin-Watson -2 < DW < 2 indicates there is no autocorrelation.
c)If the value of Durbin-Watson > 2 indicates negative autocorrelation
4. Multicollinearity test
Collinearity is a very common phenomenon.From the linear estimation of another
estimated variable, the variable in the multiple regression model can be estimated,
and its estimation accuracy is very high. Under this event, the coefficient values of
41
the multiple regression may echo small changes in the model data, and this change
is not regular. Multicollinearity does not reduce the reliability of the model's
estimation power, it only reduces the estimated value of the relevant individual
(Miao, 2013).
The correlation matrix can be analyzed to test the multicollinearity predict
multi-collinearity problems. The table below lists the correlation coefficients
represented by the r values.
42
Table 3.3 Multicollinearity Test
Source: Jason & Steven, 2013
This table indicates that when the value of r is >0.7,the coincidence relationship
between the detected variables is relatively large. On the contrary, when the value
of r is <0.7,the coincidence relationship between the detected variables is relatively
small. Therefore, in order to avoid too much deviation, the correlation coefficient
should be <0.7 when detecting.
3.8 Multiple Regressions Analysis
Multiple Regression Analysis refers to treating a variable as a dependent variable in
a related variable, and the other one or more variables as an independent variable,
establishing a linear or nonlinear mathematical model quantity relationship between
multiple variables and utilizing A statistical analysis method for analyzing sample
data. There are also multiple regression analysis that discusses the linear dependence
of multiple independent variables and multiple dependent variables, called the
multiple multiple regression analysis model(or simply many-to-many regression)
(Percival, 2015).
The influence of independent to dependent variables can be written in linear
regression equation as follows:
𝐘 = 𝛃𝟎 + 𝛃𝟏𝐗𝟏 + 𝛃𝟐𝐗𝟐 + 𝛃𝟑𝐗𝟑 + 𝛃𝟒𝐗𝟒 + 𝛆 Eq.5
Where:
Y = Return on assets
43
β0 = Y intercept
β1 - β4 = regression coefficient
X1 =Interest rate
X2 = Exchange rate
X3 = GDP
X4 = Money supply
ε = random error
3.9 Hypothesis Test
3.9.1 F - Test
The F test can dissolve the denaturation of the data set according to the sum of
squares, and its function is to show the ratio of the squares of different data sources
(Argyrous, 2005).The formula is as following:
Where:
F = statistic test for F distribution
R2 = coefficient of determination
k = number of independent variables in the model
n = number of samples
H0: β1 = β2 =β3 =β4, when the significance of F > 0.05, then result will be accept H0。
44
Ha: at least when βi 0, when the significance of F < 0.05, then result will be reject
H0。
3.9.2 T - Test
The t test is an inferred statistic used to determine whether there is a significant
difference in the mean between the two groups that may be related to certain features.
It is primarily used for data sets, such as data sets recorded as the result of 100 coin
flips, following a normal distribution, and there may be unknown conditions.
variance. The t test is used as a hypothesis testing tool that allows the test to be
applied to the assumptions of the population (Argyrous, 2005).
The t-test looks at the t-statistics, t-distribution values, and degrees of freedom to
determine the probability of a difference between the two sets of data. To test with
three or more variables, you must use analysis of variance.
Where:
j = 1, 2, 3.... n
t = the significance of in dividable regression coefficients
bj = estimated coefficient of independent variable
βj = actual coefficient of independent variable
Sbj = standard error of the regression coefficient
The t-test will help researcher in determining the partial influence among an
independent variable towards dependent variable.The hypotheses of t-test are:
45
1. H01:β1=0 or if probability t-statistics >0.05 then there is no significant partial
influence of interest rate towards return on assets.
Ha1:β1≠0 or if probability t-statistics <0.05 then there is no significant partial
influence of interest rate towards return on assets.
2. H02:β2 =0 or if probability t-statistics >0.05 then there is no significant partial
influence of exchange rate towards return on assets.
Ha2:β2≠0 or if probability t-statistics <0.05 then there is no significant partial
influence of exchange rate towards return on assets.
3. H03:β3=0 or if probability t-statistics >0.05 then there is no significant partial
influence of GDP towards return on assets.
H03:β3≠0 or if probability t-statistics <0.05 then there is no significant partial
influence of GDP towards return on assets.
4. H04:β4=0 or if probability t-statistics >0.05 then there is no significant partial
influence of money supply towards return on assets.
Ha4:β4≠0 or if probability t-statistics <0.05 then there is no significant partial
influence of money supply towards return on assets.
3.10 Coefficient of Determination (R2)
the coefficient of determination, denoted R2 or r2 and pronounced "R squared", is
the proportion of the variance in the dependent variable that is predictable from the
independent variables (Yong, 2017).
It is a statistic used in the context of statistical models whose main purpose is either
the prediction of future outcomes or the testing of hypotheses, on the basis of other
related information. It provides a measure of how well observed outcomes are
replicated by the model, based on the proportion of total variation of outcomes
explained by the model (Argyrous, 2013).
46
47
CAPTER IV
ANALYSIS OF DATA AND INTERPRETATION
4.1 Company Profile
1. Bank of China
Bank of China, BOC was officially established on February 5, 1912 with the
approval of Mr. Sun Yat-sen. It is a large state-owned bank managed by the central
government and a national deputy ministerial level. Bank of China is the only bank
in China that has been operating for more than 100 years and is the most
internationalized and diversified bank in China. The agency is located in mainland
China and 56 countries and regions. Registered capital of 2,943,777,121.4 million
yuan, Bank of China listed time: 2006-07-05, stock code is 601988, the total value
of the Chinese banking market as of 2018: 1,086.3 billion, income (three): 0.521,
PE (moving): 5.32, net assets :5.024, P/B ratio: 0.73, revenue: 376.1 billion
year-on-year growth of 3.32%, net profit: 153.3 billion year-on-year growth of
5.34%, gross profit margin: 0.00%, net profit margin: 43.27%, ROE: 10.28% debt
ratio: 91.93% .
2. Industrial and Commercial Bank of China
Industrial and Commercial Bank OF China(ICBC)was established on January 1,
1984. The head office is located at No. 55, Fuxingmen Inner Street, Beijing. It is a
large state-owned bank under the central management and a national deputy
ministerial unit. Registered capital of 34,932,123,460 yuan, time to market:
2006-10-27, stock code 601398, the total value of the Chinese banking market as of
2018: 1.98 trillion, income (three): 0.672, PE (moving): 6.19, net assets: 6.119 P/B
ratio: 0.91, revenue: 577.1 billion year-on-year growth of 7.71%, net profit: 239.6
billion year-on-year growth of 5.10%, gross profit margin: 0.00%, net profit margin:
41.61%, ROE: 11.36%, debt ratio: 91.91%.
48
3. China Construction Bank(CCB)
China Construction Bank was established on October 1, 1954. The head office is
located at No. 25, Financial Street, Beijing. It is a large state-owned bank under the
central management and a national deputy ministerial unit. Registered capital of
25001097.7486 million, time to market: 2007-09-25, stock code 601939, the total
value of China Construction Bank market as of 2018: 1.74 trillion, income (three):
0.856, PE (moving): 6.09, net assets: 7.370, P/B ratio: 0.94, revenue: 500 billion
year-on-year growth of 5.94%, net profit: 214.1 billion year-on-year increase of
6.39%, gross profit margin: 0.00%, net profit margin: 42.97%, ROE: 12.06%, debt
ratio: 91.70% .
4. Hua Xia Bank(HB)
Hua Xia Bank established in Beijing in October 1992, is a joint-stock bank. In
March 1995, the shareholding system was reformed. In September 2003, the initial
public offering of shares was listed and traded (stock 600015), becoming the fifth
listed bank in the country. Registered capital of 1282268.665 million yuan, time to
market: 2003-09-12, stock code 600015, up to 2018 Huaxia Bank market total value:
120.5 billion, income (three): 0.943, PE (moving): 6.23, net assets: 12.36 city Net
rate: 0.63, revenue: 50.62 billion year-on-year growth of 1.07%, net profit: 14.51
billion year-on-year growth of 2.01%, gross profit margin: 0.00%, net profit margin:
28.88%, ROE: 8.83%, debt ratio: 93.02%.
5. China Everbright Bank(CEB)
China Everbright Bank was established in August 1992. It is one of the subsidiaries
of China Everbright Group. It is a ministerial company directly under the State
Council. It is headquartered in Beijing and approved by the State Council and
approved by the People's Bank of China. Financial enterprise. Registered capital of
4667909.5 million, time to market: 2010-08-18, stock code 601818, as of 2013,
49
China Everbright Bank's total market value: 213.1 billion, income (three): 0.641,
PE (moving): 5.76, net assets: 5.554 P/B ratio: 0.73, revenue: 81.36 billion
year-on-year growth of 18.26%, net profit: 27.76 billion year-on-year growth of
9.15%, gross profit margin: 0.00%, net profit margin: 34.17%, ROE: 9.50%, debt
ratio: 92.77%.
6. China CITIC Bank
China CITIC Bank formerly known as CITIC Industrial Bank, was founded in 1987,
changed its current name at the end of 2005, and is headquartered in Beijing.
Registered capital: 489,347,596,573 yuan, on April 27, 2007, CITIC Bank was
listed on the Shanghai Stock Exchange, stock code: 601998, the total value of
CITIC Bank's market in 2018: 289.2 billion,Revenue: 0.910, PE (moving): 5.89, net
assets: 8.925, P/B ratio: 0.66, revenue: 121.4 billion year-on-year increase of 5.27%,
net profit: 36.80 billion year-on-year increase of 5.93%, gross profit margin: 0.00% ,
net interest rate: 30.87%, ROE: 9.50%, debt ratio: 92.55%.
7. Agricultural Bank of China(ABC)
Agricultural Bank of China was established in 1951. The head office is located at
No. 69, Jianguomen Inner Street, Beijing. It is a large state-owned bank under
central management,a national deputy ministerial unit. Registered capital:
3,247,941,700 yuan, time to market: 2006-10-27, stock code 601288, as of 2018,
the total value of the Agricultural Bank of China is 1,287.9 billion, income: 0.490,
PE (moving): 5.63, net assets: 4.430, P/B ratio: 0.83, revenue: 457.4 million
year-on-year growth of 12.01%, net profit: 171.6 billion year-on-year growth of
7.25%, gross profit margin: 0.00% net profit margin: 37.56%, ROE: 11.96%, debt
ratio: 92.80%.
8. China Merchants Bank
China Merchants Bank is China's first state-owned joint-stock commercial bank
50
wholly owned by corporate legal person, referred to as China Merchants Bank. It
was established on April 8, 1987 and was founded by the Hong Kong Central
Enterprise Investment Promotion Group Co., Ltd. One of the fifth largest banks in
China's mainland market value and one of the eight-line five-guarantee of
Chinese-funded financial stocks in Hong Kong. The head office of China Merchants
Bank is located in Futian District, Shenzhen.
China Merchants Bank A shares were listed on the Shanghai Stock Exchange On
April 9, 2002,. On September 8, 2006, China Merchants Bank began public
offerings in Hong Kong, issuing approximately 2.2 billion H shares, raising HK$20
billion, and listing on the Hong Kong Stock Exchange on September 22. The net
capital exceeds 290 billion and the total assets exceed 4.4 trillion. Revenue in 2018
(3): 3.194 PE (moving): 8.60, net assets: 21.42, P/B ratio: 1.43, revenue: 188.2
billion year-on-year growth of 13.21%, net profit: 67.38 billion year-on-year growth
of 14.58%, gross profit margin: 0.00 %, net profit margin: 35.90%, ROE: 14.30%,
debt ratio: 91.87%
4.2 Descriptive Analysis
Descriptive statistics enumerate certain parameters of the data set, which use a
comparison with the fixed number to check each average and standard deviation to
help the user understand the specific data set, and further recognition.
Descriptive Statistic Result
Table 4.1 Descriptive Statistics
Mean Std. Deviation N
ROA 1.0405 0.18998 56
Interest rate(x1) 2.3875 0.75548 56
Exchange rate(x2) 6.399871 0.26468 56
51
Source: Constructed in SPSS 20.0 (2018)
According to the above table, the specific data of the variable is clearly
explained.as follows:
1. ROA is a dependent variable. Its average value is 1.0405 and the standard
deviation is 0.18998.
2. The interest rate is an independent variable. The average is 2.3875 and the
standard deviation is 0.75548.
3. Exchange rate is an independent variable. The average is 6.399871 and the
standard deviation is 0.2646804.
4. GDP is an independent variable. Its average is 702,848.686 and the standard
deviation is 119032.9634.
5. Money supply is an independent variable. The average is 425285.4857 and the
standard deviation is 94714.55618.
4.3 Data Analysis
4.3.1 Normality Test
Quantitative data generally uses a histogram (JunZheng, 2011).Use the percentage
of data to make a histogram. The variables are placed on the x-axis and the
frequency is placed on the y-axis to form a histogram. The relative frequency of the
analyzed histogram is shown as limiting the frequency corresponding to the height.
GDP(x3) 702848.686 119032.9634 56
Money supply(x4) 425285.4857 94714.55618 56
52
Figure 4.1 Histogram
Source:Constructed in SPSS 20.0 (2018)
Analysis of the histogram in Figure 4.1 shows that most of the results are between -2
and 2, and the graphical data is normally distributed. This result shows that the
histogram is evenly distributed and presents a left-right distribution.
53
Figure 4.2 Normal P - P Plot of Regression Standardized Residual
Source:Constructed in SPSS 20.0 (2018)
The normal P-P map based on the regression normalized residual is shown in Figure
4.2. The analysis shows that in the normal distribution, the data is distributed on the
diagonal or near the diagonal, and the regression model supports the normal
hypothesis.
4.3.2 Autocorrelation test
Auto correlation is a characteristic of data which shows the degree of similarity
between the values of the same variables over successive time intervals (Xiang,
2015).At Durbin Watson, they determined that:
a. Durbin Watson is less than -2, indicating that there is a positive autocorrelation
problem.
54
b. Durbin Watson is greater than +2, indicating a negative autocorrelation problem.
c. Durbin Watson is between -2 and +2, which indicates no autocorrelation problem.
Table 4.2 Model Summaryb
Source:Constructed in SPSS 20.0 (2018)
Durbin-Watson's results show that the data exceeds -2 but is less than + 2. According
to the test rules, we conclude that this test does not have an autocorrelation trend in
the regression model.
4.3.3 Multicollinearity Test
Perform this test is to determine if there is a correlation between the independent
variable and other independent variables. This study has four independent variables,
interest rate, exchange rate, GDP, and money supply. There is no multicollinearity
problem in normal regression models. If the correlation between the independent
variables is Tolerance<0.1or >1 andVIF<or>, then there is no multicollinearity
problem in the model. If the independent variable correlation value
is0.1<Tolerance<1 ,1<VIF<10 , there is a multicollinearity problem between the
excluded variables..
Model R R Square Adjusted R Square Std. Error of the
Estimate
Durbin-Watson
1 0.767a 0.502 0.481 .161201603178227 0.333
a. Predictors: (Constant),Interest rate, Exchange rate, GDP,Money supply
b. Dependent Variable: ROA
55
Table 4.3 Multicollinearity Test Result
Source:Constructed in SPSS 20.0 (2018)
These data show that they satisfy 0.1<Tolerance<1, 1<VIF<10, which means that
there is no multicollinearity problem in the data model we studied, which further
indicates that our research model is no problem.
4.3.4 Heteroskedasticity Text
Collinearity Statistics
Tolerance VIF
.303 3.295
.260 3.077
.200 5.333
.600 9.939
56
Figure 4.3 Scatter plot of Heteroskedasticity
Source:Constructed in SPSS 20.0 (2018)
Figure 4.4 is a scatter plot of the heteroscedasticity of SPSS 20. In the figure we can
see that the data in the figure is randomly and irregularly distributed, and there is no
regular pattern. The results at this time show that there is no heteroscedasticity.
4.3.5 Measuring coefficient
The significance of the decision coefficient (R2) is to measure the strength of the
dependent variable affecting the dependent variable. Since more than three
independent variables are used, the adjusted Rsquare is used.
Table 4.4 Weighted Statistics
Model Summaryb
Model R R Square Adjusted R
Square
Std. Error of
the Estimate
Durbin-Watson
1 0.767
a 0.502 0.481 0.161201603 0.333
57
Source:Constructed in SPSS 20.0 (2018)
When the independent variable affects the strength of the dependent variable, its
value is close to 1, and this coefficient is determined to be good. As shown in the
graph, the adjusted R-squared value is 0.481. In other words, the independent
variables we selected, interest rate, exchange rate,GDP, money supply, have an
impact on ROA of 48.1%. Relatively, the remaining 51.9% is the impact of other
variables not studied in the study.
4.4 Hypothesis Test
4.4.1 F-Test
The F test is very sensitive to the normality of the data, so the levene test, the
Bartlett test, or the Brown–Forsythe test are more robust than the F test when
testing the homogeneity of the variance. The F test can also be used for the mean
comparison between three or more groups, but if the data being tested cannot satisfy
the conditions of a normal distribution, the robustness of the data will be greatly
reduced, especially when the significance level is compared low time.When the
numerical result is affected by the independent variable, this value should be <0.05.
Table 4.5 ANOVAa
ANOVAa
Model Sum of Squares df Mean
Square
F Sig.
Regression 0.660 4 0.165 6.349 0.000b
Residual 1.325 51 0.026
Total 1.985 55
Source: Constructed in SPSS 20.0 (2018)
178227
58
As shown, the last value in table 4.4 shows that the P value (Sig) is 0.000 <0.05. So
all the independent variables in the study data have a significant impact on the
dependent variable ROA.
4.4.2 T-Test
A t-test is a type of inferential statistic used to determine if there is significant
difference between the means of two groups, which may be related in certain
features.
the formula for a test statistic that either exactly follows or closely approximates a
t-distribution under the null hypothesis is given. Also, the appropriate degrees of
freedom are given in each case. Each of these statistics can be used to carry out
either a one-tailed or two-tailed test.
Once the t value and degrees of freedom are determined, a p-value can be found
using a table of values from Student's t-distribution. If the calculated p-value is
below the threshold chosen for statistical significance the 0.05, then the null
hypothesis is rejected in favor of the alternative hypothesis.
59
Table 4.6 Coefficientsa
Source: Constructed in SPSS 20.0 (2018)
Analysis of the results of the four independent variables according to table 4.4
1.The result of interest rate(X1): T is 0.000<0.05, and interest rate has a significant
effect on the ROA.
2.The result of exchange rate(X2): T is 0.04 <0.05, and GDP has a significant
impact on the ROA.
2.The result of GDP(X3): T is 0.000 <0.05, and GDP has a significant impact on the
ROA.
4.The result of money supply(X4):T is 0.006<0.05, and money supply has a
significant effect on the ROA.
4.5 Coefficient of Determination (R2)
The coefficients are generally expressed as a percentage, which is 1, if the number
Model Unstandardized
Coefficients
Standardized
Coefficients
t Sig.
B Std.
Error
Beta
(Constant)
3.290 2.917 1.128 .000
Interest rate(X1) .039 .052 .154 .743 .000
Exchange rate(X2) -.357 .513 -.498 -.696 .04
GDP(X3) -5.019
E-007
.000 -.314 -.387 .000
Money supply(X4) 7.011E
-007
.000 .350 .246 .006
60
is closer to 1, it means that the more data is on the regression line, if the value is 0.9,
then it means that 90% of the data is on the regression equation.
Table 4.7 Model Summaryb
Source: Constructed in SPSS 20.0 (2018)
Analysis of the table 4.7 model summary, R is 0.767, R square is 0.502, the
independent variable of this study is four, so we will take adjusted R square, its value
is 0.481, so the proportion of this study is 48.1%, the remaining research accounted
for 51.9%.
4.6 Interpretation of Result
1. Hypothesis 1: There is a significant influence of interest rate towards ROA in
the bank of China
Analysis of the 4.4.T test study, the results show that interest rate has a significant
impact on ROA, the P value of interest rate is 0.000<0.05, so acceptable H1.
A bank is a financial institution that undertakes credit intermediation through
deposits, loans, exchanges, and savings. The bank is one of the financial
institutions and the most important financial institution. Its main business scope
includes absorbing public deposits, issuing loans and discounting bills. In China,
Model R R Square Adjusted R Square Std. Error of the
Estimate
Durbin-Watson
1 .767a .502 .481 .161201603178 .333
61
the People's Bank of China is the central bank of China.
It can be seen that interest rate is the main source of income for banks. It is to
obtain benefits through deposit and loan spreads, that is, to pay depositors less
interest rates, and mortgage loans have a higher rate. The bank's deposit and loan
business not only allows depositors to obtain interest income, but also provides
services for corporate finance (Fan, 2012).
2. Hypothesis 2: There is a significant influence of exchange rate towards ROA in
the bank of China.
Analysis of the 4.4.T test study, the results show that exchange rate has a
significant impact on ROA, the P value of interest rate is 0.04<0.05, so acceptable
H2.
The exchange rate generally refers to the quotation of RMB to the US dollar, that
is, how many US dollars are converted into RMB. The appreciation of the RMB
refers to the rise in the RMB exchange rate.
The exchange rate has been formulated and announced by the state administration
of foreign exchange before 1994. After the exchange rate was merged on January
1, 1994, a single, managed floating exchange rate system based on market supply
and demand was implemented. The People's Bank of China is based on the
previous one. The price formed by the Japanese inter-bank foreign exchange
market announces the exchange rate of the major currencies such as the RMB
against the US dollar. Based on this, each bank will list itself within the floating
range prescribed by the People's Bank of China (Yong, 2013).
3. Hypothesis 3: There is a significant influence of GDP towards ROA in the
bank of China.
Analysis of the 4.4.T test study, the results show that GDP has a significant
62
impact on ROA, the P value of GDP is 0.000<0.05, so it is acceptable for H1.
Gross domestic product is usually used to compare with the same period of last
year. If it increases, it means that the economy is faster and it is better for its
currency to appreciate. If it is reduced, it means that the economy is slowing
down and its currency is depreciating. The GDP growth rate of 3% is the ideal
level, indicating that economic development is healthy. Above this level, there is
inflation pressure; below 1.5% growth, it shows that the economy is slowing
down and there is a recession sign.
The growth rate of gdp declines, indicating that the economy is sluggish,
corporate profits are falling, days are sad, and even losses. This requires banks to
provide funds for financing and ease the pressure on funds. If the interest rate is
high, the burden on enterprises is too high, which is not conducive to the
development of the whole society (JunZheng, 2013).
From the national level,GDP does not work, directly leading to employment
problems, causing social problems. From the current domestic practice is to
increase infrastructure projects and expand domestic demand. Under such
circumstances, raising the interest rate is not conducive to the financing cost of
the whole society (Xiang, 2010).
4. Hypothesis 4: There is a significant influence of money supply towards ROA in
the bank of China.
Analysis of the 4.4.T test study, the results show that money supply has a
significant impact on ROA, the P value of interest rate is 0.006<0.05, so
acceptable H4.
Statutory deposit reserve ratio. The statutory deposit reserve ratio is determined
by the central bank and fixed in the form of a law. It is used for a certain ratio of
various financial institutions to deposit a certain amount of deposit reserve
63
according to the accepted deposits. The amount calculated according to the
statutory deposit reserve ratio is the statutory deposit reserve. The original
purpose of the statutory deposit reserve is to maintain the liquidity of bank assets,
improve the bank's liquidity, ensure the interests of depositors and their own
security, and prevent bank failures (Wenping, 2010).
Changes in the statutory deposit reserve ratio are inversely proportional to
changes in the bank's existing reserves and market money supply, and are directly
proportional to changes in the federal funds rate and short-term interest rates on
the market. Therefore, the central bank can adjust the statutory deposit reserve
ratio in response to economic prosperity and recession and the tightness of
monetary policy, and play a role in regulating finance.
5. Hypothesis 5:There is a significant influence of interest rate,exchange rate,GDP,
and money supply towards ROA in bank of China simultaneously.
Comparative data analysis this study, "There is a significant influence of interest
rate, exchange rate,GDP,and money supply towards ROA in China
simultaneously." According to the table, the value of the F statistic is 0.000, less
than 5%, also That is to say, the independent variables in the study also affect the
ROA, and there is a connection between them, so accept H5.
According to the data, the interest rate, exchange rate, GDP,money supply, affects
48.1% of the ROA, and the remaining 51.9% is affected by other factors.
64
CHAPTER V
CONCLUSIONS AND RECOMMENDATIONS
5.1 In conclusion
According to the T-test study results in this study, it can be concluded that the
independent variables in the study have certain influence on the dependent variables
of the study, which are summarized as follows:
1. Interest rate is one of the bank projects. It refers to the ratio of the amount of
interest to the amount of borrowed funds, that is, the principal, for a certain
period of time. The interest rates in bank of China are controlled by the state,
and the major banks can only fluctuate within a certain range of this control
value. In other words, within a certain range, the bank's interest rate can also
show the bank's profit.
2. Exchange rate refers to the ratio or price of a country's currency to another
country's currency. It is subject to the central bank. The major banks can
change within a certain range. Its changes affect the bank's profits to a certain
extent,affect the bank's ROA.
65
3. GDP has a significant impact on bank ROA.According to the research, ROA
will increase with GDP growth, and its growth rate will increase with GDP.
Therefore, it can be concluded that the increase of GDP leads to the growth of
ROA.
4. Money supply is composed of deposit currency and cash currency. It refers to
the country's currency stock at a certain point in time. That is to say, to a
certain extent, the money supply affects the bank's profit and limits the
customer.According to research, ROA will grow as the money supply
increases.
5. In this study, data and then analysis can be obtained. Interest rates, exchange
rates, GDP, and money supply have a significant impact on ROA.These four
independent variables affect the 48.1% change of ROA, while the other 51.9% of
the influencing factors are belonging to the factors not studied in this study.
5.2 Recommendations
After a series of research and analysis, I would like to suggest the following points
and opinions.
The specific recommendations are as follows:
1. China's banking industry
It is recommended that senior management should pay more attention to various
national policy information about the central bank, such as interest rates and
exchange rates, as well as national data, information, GDP, and money supply,
because these factors affect the bank’s profits to some extent, as early as possible.
Learn and plan your solution.
Due to the loose internal banks, the efficiency of banks has declined. It is
66
necessary to actively adjust the banking policies, actively respond to various
emergencies that can affect the company, and quickly identify internal problems
of banks, so that the bank's performance, profits, and assets will increase.
These research factors can affect the change of bank ROA to a certain extent. The
exchange rate affects the bank's profit, which affects the bank's ROA. Therefore,
the company should set up a group to study the bank data, and timely discover
and formulate the plan to solve it quickly.
2. Academic community
In order to get a better ROA, the company should formulate a plan to a certain
extent, create higher profits, strive for greater profits without reducing the
company's assets,study various government data, and work out the perfect data.
The program, in order to get a better ROA,this study aims to better develop the
bank.
3. Future researchers
Proposals for researchers who continue to delve into this research in the future:
1. Expand more bank data for analysis.
2. Add more independent variables to improve the stability of the research
project.
3. The number of research data should be more than seven, and more in-depth
research data. After expanding the research data and content analysis, future
researchers will have a deeper understanding of the bank ROA.
67
REFERENCES
Book
Argyrous, G. (2005-11-23). Statistics for Research: With a Guide to SPSS. London:
SAGE. ISBN 978-1-4129-1948-7.
Henry C. Thode, Jr. (2002). Testing for Normality. New York: Marcel Dekker, Inc.
p. 479. ISBN 978-0-8247-9613-6.
Mann,Prem S. (1995). Introductory Statistics (2nd ed.). Wiley. ISBN 0-471-31009-3.
Nick, Todd G. (2007). "Descriptive Statistics". Topics in Biostatistics. Methods in
Molecular Biology. 404. New York: Springer. pp. 33–
68
52. doi:10.1007/978-1-59745-530-5_3. ISBN 978-1-58829-531-6.
Percival, Donald B.; Andrew T. Walden (1993). Spectral Analysis for Physical
Applications: Multitaper and Conventional Univariate Techniques. Cambridge
University Press. pp. 190–195. ISBN 978-0-521-43541-3.
Priestley, M. B. (1982). Spectral analysis and time series. London, New York:
Academic Press. ISBN 978-0125649018.
Ralph B. D'Agostino (1986). "Tests for the Normal Distribution". In D'Agostino, R.B.;
Stephens, M.A. Goodness-of-Fit Techniques. New York: Marcel
Dekker. ISBN 978-0-8247-7487-5
Trochim, William M. K. (2006). "Descriptive statistics". Research Methods
Knowledge Base. Retrieved 14 March 2011.
Journals
Ba Shusong;Wu Bo;Zhu Yuanqian;Analysis of the Effective Exchange Rate of RMB
after the Reform of Exchange Rate System and Its Impact on International
Trade and Foreign Exchange Reserves[J];International Finance
Research;2017-04
Hu Hongjun, Zhou Zhaoxiong;Analysis of the Impact of Arbitrage on RMB Interest
Rate and Exchange Rate[J];Journal of Donghua University(Social Science
Edition);2011-01
69
Liangzhou Ci: Bank M&A Research and China Banking Industry [D]; University of
International Business and Economics; 2010
Liu Sheng, Xie Chi; Preliminary Study on Interest Rate Risk Management of
Commercial Banks[J];Journal of Hunan University(Social Science
Edition);2015-02
Li Xianghong;The Impact of Interest Rate Marketization on Banks and the
Countermeasures of Small and Medium Banks[J];Southern Finance;2013-10
Qiu Xuefeng:On the Benefits and Risks of RMB Internationalization[J];Journal of
Jiangxi Financial Workers University;2016-04
Wang Haitao; Research on RMB Internationalization [D]; Nanjing University of
Science and Technology; 2016
Wang Miao; Research on the Impact of RMB Internationalization on China's Banking
Industry [D]; Tianjin University of Finance and Economics; 2013
Xu Qiujie;Comparative Analysis of Interest Rate Risk of China's Commercial
Banks[J];Finance & Economy;2013-09
Yang Xingbin;;Discussion on Several Issues of RMB Exchange Rate[J];Price
Monthly; 1993-12
Zhao Ai'an: Analysis of the Benefits, Costs and Internationalization of RMB in
Internationalization of Currency[J];Journal of Shanxi Economic Management
Cadre College;2016-02
Zhao Na:Analysis of the Benefits and Costs of RMB
Internationalization[J];Heilongjiang Foreign Trade and Economic
Cooperation;2017-06
70
Websites
China Banking Regulatory Association. http://www.cbrc.gov.cn/
chinese/home/docViewPage/110009.html.
shanghai Stock Exchange http://www.shse.cn/
Shanghai Stock Exchange http://www.shse.com.cn/
https://tradingeconomics.com/China/money-supply-m2
https://eniu.com/gu/sh601398/roe
https://bank.cngold.org/c/2019-01-29/c6203244.html
https://www.sogou.com/link?url=DSOYnZeCC_oJpIBFK705hxrEAJFsW-pr
http://data.eastmoney.com
71
APPENDIX-1
STATISTICAL RESULT
Table 4.1 Descriptive Statistics
Normality Test
Descriptive Statistics
Mean Std. Deviation N
ROA 1.0405 0.18998 56
Interest rate(x1) 2.3875 0.75548 56
Exchange rate(x2) 6.399871 0.26468 56
GDP(x3) 702848.686 119032.9634 56
Money supply(x4) 425285.4857 94714.55618 56
72
73
Fixed Test
ANOVAa
Model Sum of Squares df Mean
Square
F Sig.
Regression .660 4 .165 6.349 .000b
Residual 1.325 51 .026
Total 1.985 55
T-Test
Model Summaryb
Model R R
Square
Adjusted R Square Std. Error of the
Estimate
Durbin-Watson
1 0.767a 0.502 0.481 0.161201603178227 0.333
Multicollinearity Test
ROA Interest
rate
Exchange
rate
GDP Money
supply
Pearson
Correlation
ROA 1.000 .519 -.563 -.536 -.563
Interest
rate
.519 1.000 -.812 -.799 -.834
Exchange
rate
-.563 -.812 1.000 .679 .661
GDP -.536 -.799 .679 1.000 .670
Money
supply
-.563 -.834 .661 .670 1.000
74
Model Unstandardized
Coefficients
Standardized
Coefficients
t Sig. Collinearity
Statistics
B Std.
Error
Beta Tolerance VIF
(Constant)
3.290 2.917 1.128 .000
Interest rate(X1) .039 .052 .154 .743 .000 .303 3.29
5
Exchange
rate(X2)
-.357 .513 -.498 -.696 .04 .260 3.07
7
GDP(X3) -5.019
E-007
.000 -.314 -.387 .000 .200 5.33
3
Money
supply(X4)
7.011
E-007
.000 .350 .246 .006 .006 9.93
9
75
APPENDIX-2
RAW DATA
Bank name Year Intere
st rate
Exchang
e rate GDP
(Unit:100
Million
Yuan)
Money
supply
(Unit:10
0 Million
Yuan)
ROA(%)
Bank of China Limited 2012 3.25 6.1123 538580 308664.2 1.101735016
Bank of China Limited 2013 3.25 6.1332 592963.2 337291.05 1.131218457
Bank of China Limited 2014 3.25 6.1730 641280.6 348056.41 1.112131148
Bank of China Limited 2015 1.75 6.2956 685992.9 400953.44 1.015457788
Bank of China Limited 2016 1.75 6.6573 740060.8 486557.24 0.906887052
Bank of China Limited 2017 1.75 6.7748 820754.3 543790.15 0.88751926
Bank of China Limited 2018 1.75 6.6323 900309.0 551685.9 0.869208494
Industrial and Commercial
Bank of China Limited,
ICBC
2012
3.25
6.0134
538580 308664.2 1.359749145
Industrial and Commercial
Bank of China Limited,
ICBC
2013
3.25
6.0663
592963.2 337291.05 1.38794926
Industrial and Commercial
Bank of China Limited,
ICBC
2014
3.25
6.1752
641280.6
348056.41 1.341096555
76
Industrial and Commercial
Bank of China Limited,
ICBC
2015
1.75
6.2977
685992.9
400953.44 1.250337686
Industrial and Commercial
Bank of China Limited,
ICBC
2016
1.75
6.6616
740060.8
486557.24 1.158091286
Industrial and Commercial
Bank of China Limited,
ICBC
2017
1.75
6.7701
820754.3
543790.15 1.101954772
Industrial and Commercial
Bank of China Limited,
ICBC
2018
1.75
6.6432
900309.0
551685.9
1.055039314
China Construction Bank 2012 3.25 6.1254 538580 308664.2 1.382963493
China Construction Bank 2013 3.25 6.1339 592963.2 337291.05 1.397786458
China Construction Bank 2014 3.25 6.1730 641280.6 348056.41 1.363201912
China Construction Bank 2015 1.75 6.2963 685992.9 400953.44 1.247411444
China Construction Bank 2016 1.75 6.6571 740060.8 486557.24 1.108778626
China Construction Bank 2017 1.75 6.7762 820754.3 543790.15 1.101265823
China Construction Bank 2018 1.75 6.6329 900309.0 551685.9 1.063571727
Hua Xia Bank 2012 3.3 6.3052 538580 308664.2 1.041638684
Hua Xia Bank 2013 3.3 6.0662 592963.2 337291.05 0.765550239
Hua Xia Bank 2014 3.3 6.1743 641280.6 348056.41 0.972972973
Hua Xia Bank 2015 1.95 6.2966 685992.9 400953.44 0.935643564
Hua Xia Bank 2016 1.95 6.6564 740060.8 486557.24 0.834745763
Hua Xia Bank 2017 1.95 6.7735 820754.3 543790.15 0.788844622
77
Hua Xia Bank 2018 1.95 6.6312 900309.0 551685.9 0.741697417
China EVERBRIGHT
BANK CO., LTD 2012
3.3 6.1165 538580 308664.2 1.035087719
China EVERBRIGHT
BANK CO., LTD 2013
3.3 6.1336 592963.2 337291.05 1.103305785
China EVERBRIGHT
BANK CO., LTD 2014
3.3 6.1736
641280.6 348056.41 1.054744526
China EVERBRIGHT
BANK CO., LTD 2015
1.95 6.2964
685992.9 400953.44 0.930599369
China EVERBRIGHT
BANK CO., LTD 2016
1.95 6.6566
740060.8 486557.24 0.753731343
China EVERBRIGHT
BANK CO., LTD 2017
1.95 6.7730
820754.3 543790.15 0.770171149
China EVERBRIGHT
BANK CO., LTD 2018
1.95 6.6329
900309.0
551685.9 0.783980583
China CITIC BANK 2012 3.3 6.1502 538580 308664.2 1.047297297
China CITIC BANK 2013 3.3 6.1632 592963.2 337291.05 1.076923077
China CITIC BANK 2014 3.3 6.1716 641280.6 348056.41 0.983091787
China CITIC BANK 2015 1.5 6.2956 685992.9 400953.44 0.8046875
China CITIC BANK 2016 1.5 6.6602 740060.8 486557.24 0.701517707
China CITIC BANK 2017 1.5 6.8017 820754.3 543790.15 0.75
China CITIC BANK 2018 1.5 6.6367 900309.0 551685.9 0.740432612
Agricultural Bank of China 2012 3.25 6.1054 538580 308664.2 1.09592145
Agricultural Bank of China 2013 3.25 6.1343 592963.2 337291.05 1.14217033
Agricultural Bank of China 2014 1.75 6.1761 641280.6 348056.41 1.123982467
78
Agricultural Bank of China 2015 1.75 6.2995 685992.9 400953.44 1.015177066
Agricultural Bank of China 2016 1.75 6.6572 740060.8 486557.24 0.939703628
Agricultural Bank of China 2017 1.75 6.7779 820754.3 543790.15 0.916864608
Agricultural Bank of China 2018 1.75 6.629 900309.0 551685.9 0.904529307
China Merchants Bank 2012 3.3 6.1528 538580 308664.2 1.328445748
China Merchants Bank 2013 3.3 6.1375 592963.2 337291.05 1.286069652
China Merchants Bank 2014 3.3 6.1761 641280.6 348056.41 1.181818182
China Merchants Bank 2015 1.75 6.3001 685992.9 400953.44 1.054844607
China Merchants Bank 2016 1.75 6.6634 740060.8 486557.24 1.045454545
China Merchants Bank 2017 1.75 6.7802 820754.3 543790.15 1.114285714
China Merchants Bank 2018 1.75 6.6373 900309.0 551685.9 1.160237389
79
80
81
82
83
84
85
86
87
88