International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online)

Study on the Disposal Preference of Non-Performing Loans in Chinese Commercial Banks
Shuyi Zhang

This paper analyzes the situation of non-performing assets of Chinese commercial banks, and creatively puts forward the concept of “disposition preference” with reference to risk preference. The disposal preference can help the commercial banks to set up accurate diversified NPL disposal targets in different periods from their own operation and management, and avoid the deviation of disposal behavior from the real objective of commercial banks. This paper analyzes the relationship between the three dimensions of disposal preference (liquidity goal, profit objective and safety objective) and validates it with the available data. According to the relationship between the three dimensions, this paper also proposes the steps and formulas for the commercial bank to set the disposal preference. Finally, the paper gives some advice on how to use disposal preference to guide NPL disposal.

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