Empirical Study On X-Efficiency Of Chinese Commercial Banks

Efficiency problem is the core proposition of economic research. Efficiency problem of banking industry has been attached importance to economists. and many research papers have been accumulated. X-efficiency problem of banking industry is the research frontier. By combing related research papers, we find that most of the papers about X-efficiency of banking industry are empirical researches, being short of theoretical analysis. This paper attempts to advance the research, make thorough theoretical analysis about X-efficiency of banking industry, and make empirical analysis based on solid theoretical analysis. So this paper has thorough theory significance.The background of this paper's research is the reform and development of Chinese banking industry, the sample of the empirical research is accepted from Chinese banking industry, the research conclusions and policy suggestions of this paper have instruction meanings to the reform and development of Chinese banking industry. So this paper has thorough reality significance.Since reform and open up. China's reform of monetary system is prompting forward methodically. Especially since the 1990s, The Chinese State-owned Banks started the commercialization reform, each kind of new joint-stock system commercial banks are allowed to enter, the opening degree of Chinese banking industry to the outside world enhanced, the Chinese banking industry's competition degree also enhanced to a great extent, the management achievements of Chinese banking industry have been improved. After foreign bank's entry, foreign banks and domestic banks will develop under the identical policy framework. the Chinese banking industry will face more and keener competition aspect.Under this situation, the realistic question which is worth paying attention is. after having experienced series of reforms and five year's transition-period, whether the domestic bank's operational efficiency had a distinct enhancement, whether the domestic bank's management achievements had a remarkable improvement, whether the domestic bank have had the ability to deal with the impact brought by foreign banks which have advanced management ideas, complete monitoring measures and abundant capitals. This is also the concerning matter of this article.The problems to solve in this paper include: The joint stock system reform of Chinese banking industry strengthened the market competition degree of banking industry, but whether the improvement of market competition degree causes the improvement of operation efficiency of Chinese banking industry? Which factors affect and restrict the enhancement of Chinese banking industry's efficiency? Compared with the joint stock system commercial banks, state-owned banks face more complex questions. Although the joint stock system reform for the purpose of raising its operation efficiency has made progress, the state-owned commercial banks still face a series of questions, which will affect the state-owned commercial banks to become modern joint stock system banks and the promotion of operation efficiency. How to solve the request - proxy question and incentive question to promote state-owned commercial banks' operation efficiency?This paper attempts to analyze the efficiency problem of Chinese banking industry from theoretical and empirical aspects. First this paper analyze the problem from theoretical aspect, then measures the X-efficiency of Chinese banking industry using proper method, and determines the main factors which affect the X-efficiency of Chinese banking industry through empirical study. Finally this paper designs the incentive and restraint mechanism to promote the efficiency of Chinese banking industry.Through the theoretical analysis of the X-efficiency of banking industry, this paper gets several leading conclusions as follows:First, the analytic results of Selective rationality theory shows that low requirements of the superiors to the juniors, market structure, the lack of awareness of innovation and other factors will lead to the bank's X-efficiency. Second, the analytic results of "Carte-Blanche" preference principle show that incredulity among commercial banks' different levels, low quantity of employees, commercial banks' inside administrative organization bureaucracy, contract rigid and other factors will also lead to banks' X-efficiency. Third, Individual effort equilibrium theory shows that the individual effort level inside the commercial bank and collaboration division among all group members can affect the product efficiency of commercial bank. Single incisive way, the low competition level among agents may lead to X-efficiency. Fourth, the group effort equilibrium theory shows that banks with larger scale and longer history cause to X-efficiency more easily. Fifth, the analytic results of effort game theory show that invalid incitation or lack of incitation, information asymmetry, the incredulity between management bank and working bank can lead to X-efficiency. Sixth, enterprise effort equilibrium theory shows that the adventure management level and the enterpriser aptitude may affect the bank's X-efficiency.Through empirical analysis of the X-efficiency of banking industry, this paper draws several conclusions as follows:First, to all the sample banks, loan efficiency takes on a trend of increasing under production approach or intermediation approach. Second, to all the sample banks. under the intermediation approach, the profit efficiency takes on a trend of decreasing. But under the production approach, the profit efficiency takes on increasing trend. Third, under intermediation approach and production approach, state-owned banks' general loan efficiency is higher than joint-stock commercial banks'. But the former have lower general profit efficiency than the latter. Fourth, to all the sample banks, no matter under intermediation approach or production approach, loan efficiency is higher than profit efficiency widely, and the Chinese bank s' general profit efficiency is low. which need to upgrade. Fifth, the structure of property rights, market share. capital adequacy rate and asset cost rate are all important factors that affect Chinese banks' X-efficiency.The study results of Chinese banks' incentive restraint mechanism show that the adventure evasion level and information transparency level are two leading factors which affect the effort level of commercial banks. Hence, bringing down the agents adventure evasion level and upgrading the information transparency should be taken into consideration when we want to construct valid incentive restraint mechanism. We should actively promote ownership reform focusing on share reform, construct effective information revealing mechanism, further open banking sector, increasing the intensity of banking sector and establishing the market of professional managers for the regulators.The innovation points of this paper are as follows:First, it studies Chinese banks' X-efficiency problem with deepen theoretical basis. The relative research literatures always use parameter or non-parameter method to study Chinese banks' X-efficiency empirically, which are lack of theory analysis basis. Different from the existing research literature, this paper applies the selective rationality theory. "Carte-Blanche'" preference principle. Individual effort equilibrium theory to analyze personal behavior inside Chinese banking sector. It also uses group effort equilibrium theory, effort game theory, and enterprise effort equilibrium theory to analyze the Chinese banks' enterprise behavior. Its empirical analysis is based on the theory analysis. Second, this paper measures the Chinese banks' X-efficiency with the empirical study method of stochastic frontier analysis method. At present, the majority empirical researches on Chinese banks' X-efficiency in our country used data envelopment analysis which is one of the non-parameter analyses. But the stochastic frontier analysis method is seldom used, in which this paper will make an innovation. Compared with the non-parameter data envelopment analysis, the largest advantage of the stochastic frontier analysis is considering the efficiency deviation of the sample banks which is caused by the luck and other random factors. So, it can separate the random error with the invalid factors, besides guaranteeing its effectiveness by statistic test. Based on above consideration, this paper uses the random frontier analysis method to study Chinese banks' X-efficiency. Though this method has a rigid sample quantity and the banks' input-output ratio, this paper collects and process datum which meet the above requirement.Third, this paper defines the bank planning input and output according to the intermediation approach and production approach. It also draws a contrast analysis of this two empirical research result under two defined methods. At present, on the X-efficiency research of Chinese banking sector, because of the different defined method of input and output, there is no consensus. In the definition of different methods, the empirical research results are different, or even diametrically opposite. So, this paper uses these two methods to define banks' input and output in its empirical study part, estimates the efficiency condition under these two methods, and comparatively analyzes these two estimate result.