A Study On The Efficiency And Risk Of Chinese Commercial Bank

Since the 21st century, China's banking sector has undergone enormous changes and international status has risen further. Especially after the financial crisis, Chinese banks have been hit less, and become the world's academic and financial research focus. Currently, researches of China's banking sector always focus on efficiency and risk respectively, while improving efficiency and managing risk are goals that the commercial banks need to pursue at the same time. Therefore, the efficiency of China's banking sector need be combined with the risk, which can reflect the true state of China's banking business and get the helpful suggestions for the development of China's banking industry. On the basis of international comparison, this dissertation analyzes the issues of China's banking sector efficiency and risk deeply to further build and improve the management system of Chinese commercial banks and provide a reliable basis for financial managers' decision making.This dissertation focuses on the efficiency and risk of Chinese commercial banks. First, we compare not only different types of efficiency and risk of commercial banks in China, but also home and abroad. Then, we analyze the impact of diversification on bank efficiency and risk. Finally, we analyze the impact factors of the efficiency and risk of commercial banks, particularly investigate whether China's big banks efficiency changes have effects on the small-medium banks.To compare the changes of the efficiency and risk of domestic and international banking, firstly this dissertation uses DuPont analysis and analyzes the efficiency and risk of China's banking operations from 2006 to 2009.Then we use the DEA model based on risk input to measure kinds of efficiency, including technical efficiency, pure technical efficiency, scale efficiency, and total factor productivity. The profit method is employed to select the indicators, which is different from the traditional methods, considering risk as input variables. We compare the results between with risk and without risk. It shows that the four major state-owned commercial banks are neither the most efficient, nor the least risky banks in China's commercial banks, and some joint-stock banks and city commercial banks are even better than the state-owned banks in operating conditions. Internationally, the gaps of ranking between the big banks are getting smaller and smaller. The ROE levels of Chinese state-owned banks and the big banks in other countries are very close, and the risk level of Chinese state-owned banks still need to improve. The impact of China's banking sector is smaller than other countries caused by the financial crisis. Their technical efficiency maintains a high level. A clear downward trend in the growth rate of total factor productivity, and technical change is the driving force behind this decline.This dissertation summarizes the efficiency and risk of diversification of Commercial Bank in China. We introduce the development stage and current situation of Chinese commercial banks, and make an empirical analysis on the efficiency and risk of diversification for commercial banks. The Herfindahl index constructed is used to measure the DIV variable for diversification. We research the links between diversification and profit targets, between diversification and risk-adjusted profit target, between the different types of bank diversification and profit targets, and between the diversification and banks characteristics and strategic choices. The results show that China's commercial banks diversify the overall portfolio and have more profit. The more the non-interest income, the less the profit; the less the equity the banks hold and the less the loan, the less the profit; the more the non-interest income, the greater the risk the banks hold. Big commercial banks and medium commercial banks reduce income because of diversification, but small commercial banks increase revenue.In order to study the impact of efficiency and risk of China's banking industry in the banking crisis and the influence of efficiency changes of China's big banks on the small-medium banks, this dissertation analyzes the big banks shock mechanism from the view of information channels and fundamental point. We have an empirical research on impact of the banking crisis from three aspects of the macro and micro factors and the big banks shock factors. The GR index instead of the big banks factors. The results show that during the financial crisis, China's state-owned commercial banks have a positive impact on reducing risk and crisis of small banks, and the size distribution of the bank can affect the stability of the banking system. From the micro perspective, the equity ratio, asset size, return on equity can have a positive effect. From a macro perspective, the higher the interest rate, the better banks performance. The higher the GDP growth rate, the greater the risks the banks hold.