As the operating environment for banks experiences changes,capital adequacy management has become one of the key supervision means in banking industry and major content of internal control.

However, since the unveiling of the "Basel Accord," no incentive system has been at work inside our state-owned commercial banks, external supervision is nothing but a mere formality and capital adequacy ratio has been constantly on the decline.

According to theories of the capital structure, this thesis applies a mathematic model frame to explain the validity of the capital adequacy regulation on risk-seeking behavior, undertaking loan losses and company value of commercial banks.