1. Introduction

The concept and approach of profit maximizing pertain to the strategies and techniques employed by businesses to achieve the highest possible financial gain within the context of market competition. According to the idea, it is suggested that organizations should strive to maximize their profits through the efficient allocation of resources, effective cost management, and the production of value [1]. Profit maximization serves as the fundamental principle for enterprises to acquire economic gains, while also serving as a crucial mechanism for enterprises to sustain growth and enhance shareholder value.

According to Zhang Hanshu, financial institutions play a crucial role in supplying the required capital for the economy [1]. Financial institutions facilitate investment and consumption endeavors through the provision of financial services, including loans and credits, to both enterprises and individuals. According to Lu Minfeng, the importance of liquidity and accessibility of these funds cannot be overstated in relation to economic growth [2]. Business enterprises engage in borrowing activities to enhance their productive capacity, while people resort to borrowing in order to satisfy consumer demand, hence stimulating economic growth and fostering the creation of employment possibilities. According to Fu Hongyi, financial institutions have created many financial tools and innovations, hence expanding the range of choices and opportunities available [3]. Financial institutions have enhanced the effectiveness and fluidity of financial markets through the introduction of novel financial products and services.

This paper examines the reciprocal relationship between financial institutions and local economic development from the standpoint of profit maximization theory. It investigates the correlation between economic growth and the profit acquisition activities of financial institutions, with the aim of offering comprehensive support for the advancement of local economic development.This study examines the significance of the correlation between financial institutions and economic growth, with a focus on profit maximization. Specifically, it explores how financial institutions contribute to economic growth through capital provision, introduction of financial instruments and innovations, and risk management and capital allocation. The establishment and sound functioning of financial institutions have significantly contributed to the advancement of economic progress.

2. Profit maximization theory

The theory of profit maximization holds significant importance as a theoretical framework within the field of economics. It serves as a means to elucidate the behavior and decision-making processes of enterprises as they strive to achieve profit maximizing within a market economy. The development of this concept has undergone various significant stages, encompassing traditional profit theory, contract theory, and current profit theory. According to the conventional profit theory, the primary objective of a firm is to strive for the maximization of profits. The foundation of this theory is upon the correlation between diminishing marginal utility and cost-profit dynamics. The conventional view posits that enterprises engage in decision-making processes aimed at maximizing their profits through the manipulation of output levels and pricing. Contract theory extends the framework of profit maximization theory by asserting that enterprises not only strive to maximize profits, but also take into account the contractual dynamics with external partners. Contract theory places significant emphasis on the impact of contract constraints on the conduct of firms. It asserts that enterprises must carefully study and evaluate different contract conditions while making decisions in order to optimize their own financial gains. Contemporary profit theory examines the conduct of businesses as they strive to maximize their profits from many perspectives. Various elements are taken into consideration, including market structure, competitiveness, and the property rights system, among others. According to contemporary profit theory, the optimization of profits in a business is contingent upon not only price and cost management, but also necessitates the consideration of aspects such as market demand, technical advancement, and strategic decision-making. Furthermore, the advancement of profit maximization theory has encompassed other interconnected study domains, including behavioral economics, information economics, and organization theory, in addition to the aforementioned key aspects. The exploration and investigation of these perspectives contribute to a more comprehensive and profound theoretical foundation for comprehending the behavior and decision-making process of corporate profit maximization [2].

In the context of profit maximization theory, firms are advised to focus their emphasis on the following elements. The first topic under consideration is price optimization. Enterprises want to ascertain the most advantageous price by means of conducting market research and competitor analysis in order to optimize sales and profitability. When determining prices, it is essential to consider various elements, including market demand, cost structure, product differentiation, and the competitive landscape. The second aspect pertains to the management of costs. Enterprises must effectively manage and regulate production costs, minimize diverse expenditures, and enhance profit margins. Enterprises have the potential to enhance their profitability by reducing production costs and preserving quality through several means such as improving the manufacturing process, procurement costs, and operational efficiency. The next factor to consider is product differentiation. The primary determinant of achieving maximum profitability is in the provision of products or services that are competitive in nature. Enterprises can achieve larger market share and profits by leveraging technical innovation, quality improvement, market positioning, and other strategies to provide differentiating advantages for their products. The final aspect to consider is resource allocation. Enterprises ought to strategically deploy their finite resources and direct investments towards projects that yield the highest returns. By doing a thorough examination of the potential risks, advantages, and market opportunities associated with certain initiatives, organizations can optimize resource allocation and enhance financial gains. It is noteworthy that the idea of profit maximization encompasses not only immediate financial gains but also prioritizes the enduring and sustainable growth of organizations in the long run. In the context of market rivalry, it is imperative for enterprises to take into account several variables, including social responsibility, brand image, and employee satisfaction. By doing so, they can effectively cultivate positive relationships and foster growth with all stakeholders, while simultaneously optimizing their financial gains. However, due to constraints such as the stage of development, level of development, and management perspective, numerous enterprises tend to prioritize short-term profits while neglecting the pursuit of long-term profitability during their operations and development. This tendency also gives rise to market operation and development risks, thereby contributing to significant instability in economic growth and development [3].

3. The relationship between financial institutions and economic development

3.1. The role of financial institutions in promoting economic development

Financial institutions serve a crucial and indispensable role in fostering and facilitating economic development. Financial institutions play a crucial role in the majority of economies by serving as intermediaries, thereby enabling the movement of capital, enhancing risk management practices, promoting investment and innovation, and spearheading the development of developing economic sectors.

Financial institutions play a crucial role as intermediaries in the transfer of funds. They facilitate the movement of funds from depositors to entities such as firms, individuals, or government departments who require financial resources. This is achieved by the acceptance of deposits and the provision of loans, hence stimulating economic activities. Financial institutions have the capacity to offer a range of loan options, such as commercial loans, housing loans, and consumer loans, in order to give financial assistance for the advancement of diverse sectors within the economy. Financial institutions play a crucial role in the dispersion and management of risk within the context of economic development. Financial organizations utilize data collection and analysis techniques to evaluate the creditworthiness of borrowers, thereby mitigating the potential for loan default. Furthermore, financial institutions has the capability to offer financial derivatives, insurance, and other instruments that aid in the mitigation of risks and safeguarding of assets and interests for both corporations and individuals. Financial institutions play a pivotal role in stimulating investment and fostering innovation within firms through the provision of financing and capital market services. Financial institutions have the capacity to offer capital assistance to firms through the provision of venture capital and private equity financing. This support enables enterprises to enhance their scale and facilitate the development of novel goods and technologies. Financial institutions have the capacity to offer financial market transaction services, including stock trading and bond issuing, in order to facilitate financing opportunities for firms and foster economic growth. Financial institutions also serve as key actors in providing policy guidance and contributing to the advancement of economic development. Financial institutions have the capacity to execute the monetary policies established by the central bank, thereby exerting influence over the trajectory of economic growth through the regulation of interest rates, credit policies, and other mechanisms. In addition, they assume a normative and supervisory function at both the local and industry levels in order to sustain market stability and safeguard the interests of investors [4].

Financial institutions have traditionally assumed a pivotal role in facilitating diverse dimensions of economic development. These include providing financial resources, managing risks, fostering investments and innovation, as well as offering direction and contributing to policy formulation and advancement. These roles play a crucial role in stimulating economic growth, fostering employment opportunities, and generating greater value and wealth for society. Using banks as a case study [5], The contribution of financial institutions to the advancement of economic growth is evidenced through the following tangible facets: Initially, it is important to acknowledge that banks fulfill the crucial function of intermediation within the economy. Financial institutions gather the monetary resources of depositors, whether they be individuals or businesses, and subsequently allocate these monies to borrowers. Intermediation facilitates the enhanced efficiency of capital circulation, enabling individuals and enterprises to optimize their utilization of funds for investment and wealth generation. Furthermore, financial institutions play a crucial role in facilitating payment and settlement processes inside the economy. Bank accounts and electronic payment systems facilitate transactions and payments for individuals and enterprises, hence enhancing convenience and fostering economic circulation and development. The absence of banks' payment and settlement functions would lead to a significant increase in complexity and inefficiency within economic processes. Moreover, financial institutions facilitate individuals' access to borrowing and investment opportunities. Financial institutions have the capacity to extend credit to both individuals and businesses in order to facilitate their consumption and investment requirements. This phenomenon contributes to the stimulation of economic growth and the generation of employment opportunities [6]. Simultaneously, financial institutions have the capacity to engage in market investments, thereby facilitating the attainment of financial objectives for both individuals and enterprises, while also fostering economic advancement. In addition, banks fulfill the function of overseeing and managing risks. In order to maintain the stability and safety of the financial system, banks are obligated to meet the regulatory standards established by governing bodies. Simultaneously, banks are required to engage in risk management practices to effectively navigate market swings and financial hazards, thereby safeguarding the interests of depositors. In conclusion, financial institutions, specifically banks, assume a crucial function in fostering economic progress. As a facilitator of financial resources, they enhance the pace of economic transactions. By means of their payment and settlement functionalities, they effectively assist the process of economic circulation. By facilitating access to loans and investment, these entities contribute to the promotion of economic growth and the generation of employment opportunities. In addition, banks play a crucial role in maintaining the stability of the financial system by implementing regulatory measures and effectively managing risks. The aforementioned roles contribute to the significance of banks as a crucial pillar and catalyst of the economy [7].

3.2. The negative impact of financial institutions on economic development

Financial institutions have a significant role in fostering economic development, albeit with potential adverse consequences on such progress.

1) Risk concentration: Financial institutions often have a large amount of capital and resources, which may lead to the concentration of risks in the economy. When financial institutions have problems or suffer losses, it can have a serious impact on the entire economic system. This concentration of risk can lead to a financial crisis.

2) Financial instability: The actions of financial institutions may lead to instability in financial markets. For example, financial institutions may engage in excessive speculation or bubble formation that triggers market volatility or crashes. This instability can make it difficult for businesses and individuals to make decisions, which in turn can hinder economic development [8].

3) Unfair distribution: Financial institutions may not be fair in the distribution of resources and wealth. They may be more inclined to provide loans and financial services to customers with strong financial strength, while providing limited support to weaker economic agents. Such unfair distribution could lead to a widening gap between the rich and the poor, which in turn could lead to social instability and economic imbalance.

4) Moral hazard: Financial institutions may face moral hazard in the course of operation, such as fraud, insider trading and money laundering. These unethical behaviors may undermine the credibility of the financial system and weaken the development of the economy.

5) Capital market dependence: The important position of financial institutions in the economy may lead to excessive dependence on capital markets. Excessive reliance on the capital market may lead to the amplification of financial fluctuations, making it impossible for the economy to achieve stable and sustainable development. To mitigate the negative impact of financial institutions on economic development, it is necessary to establish a more stable and sustainable financial system, strengthen supervision and risk management, and enhance the transparency and sense of responsibility of financial institutions to ensure that they play a positive role in the economy [9].

4. Countermeasures for the development management of financial institutions based on the perspective of profit maximization

To begin with, it is imperative to develop and enhance pertinent legislation and regulations in order to effectively govern the functioning of financial institutions. This entails establishing clear guidelines and expectations for regulatory compliance and delineating the corresponding obligations and accountabilities. The proposed measures aim to develop a robust regulatory framework, enhance internal control mechanisms and risk management practices, and safeguard the legitimacy and stability of financial institutions' operational activities.

Furthermore, it is imperative to enhance the efficacy and robustness of supervision by bolstering the enforcement endeavors of regulatory entities, augmenting the allocation of resources in terms of personnel and materials, instituting a systematic framework for evaluating regulatory practices, and conducting periodic comprehensive risk assessments and audit inspections of financial institutions. It is imperative to promptly identify and address various possible risks and violations, minimize uncertainty within the financial system, and uphold market order and stability [10].

Furthermore, it is imperative to enhance risk management and monitoring practices. It is imperative for financial institutions to build a robust risk management framework encompassing risk assessment, risk control, and risk monitoring. It is imperative to enhance the early warning and monitoring systems for financial institutions, effectively identify and address risk issues in a prompt way, and proactively mitigate risks to minimize their propagation and potential impact on the overall financial system.

Furthermore, it is imperative to enhance the disclosure of information and promote transparency. Financial organizations ought to improve their information disclosure practices, encompassing financial data, business details, and risk-related information. The provision of accurate and comprehensive information is crucial in enabling market participants to gain a precise understanding of the functioning and risk profile of financial institutions. This serves to mitigate the adverse effects of asymmetric information, hence reducing uncertainty and promoting fairness in the market.

Furthermore, it is imperative to enhance global collaboration and facilitate the exchange of information on a worldwide scale. The enhancement of international collaboration and information sharing, as well as the establishment of unified regulatory norms and methods, should be prioritized in the supervision of financial institutions. There is a need to facilitate the sharing and exchange of regulatory experience and technologies among different countries. This will help in enhancing the oversight of transnational financial institutions and effectively addressing global financial risks and challenges [11]. In order to effectively supervise financial institutions from a profit maximization standpoint, it is necessary to adopt a comprehensive approach that includes the development of robust legal and regulatory frameworks, the enhancement of institutional enforcement capabilities, the establishment of risk management systems, the promotion of information transparency, and the strengthening of international cooperation mechanisms. In order to guarantee the adherence and safety of financial institutions' operations, as well as to sustain the stability and sound growth of financial markets, it is imperative to enhance supervision broadly and enhance its efficacy [12].

5. Conclusion

In conclusion, the impact of financial institutions on economic development is characterized by a high degree of complexity. The endeavor to maximize profits by financial institutions has contributed to the promotion of economic development, finance, and overall economic life. Nevertheless, the enduring presence of myopic conduct and the relentless pursuit of risk and profitability by financial institutions necessitate the government's reinforcement of oversight and governance. In order to achieve effective risk management inside financial institutions and enhance their contribution to economic development, it is imperative to establish comprehensive control measures. This will enable financial institutions to operate with greater vitality and resilience. In accordance with the principle of profit maximization, the advancement of financial institutions should not solely prioritize short-term profit maximization. Instead, it should foster positive development through judicious investment and financing practices. Additionally, it should also emphasize long-term profit maximization by consistently monitoring the stability and risks associated with positive development. By promoting the expansion of inclusive financial services, financial institutions can contribute to economic development, infuse dynamism into the economy, and foster innovation in development.The primary emphasis lies on examining the repercussions of an entity's profit-oriented endeavors on external economies. The government should prioritize the examination of financial institutions' profit structure and enhance their oversight and management.