The evaluation model of bank's assets quality based on G1 and mean-square deviation methods and its empirical research

Abstract

In order to improve the accuracy of evaluation of banks' assets quality, this paper constructed a comprehensive evaluation index system of asset quality, determined the optimal weights of indicators by combining G1 method with the mean-square deviation method, and then established a comprehensive evaluation model of asset quality, lastly empirically analyzed the levels of nine commercial banks' assets quality. The contribution lies in three aspects. Firstly, selecting the index of return on total asset to enrich the existing index system. Secondly, rejecting the virtually increased assets because of accounting matching principle and capitalization expenses to raise the authenticity of assets quality. Thirdly, evaluating the banks' assets quality by combining objective weight and subjective weight, which could avoid the disadvantage of objective weight, which can not reflect expert experience and subjective weight. Meanwhile the paper provides an effective evaluation method of assets quality for commercial banks. © 2011 Springer-Verlag Berlin Heidelberg.