The Research Of The China IPO Commercial Bank Efficiency Base On Capital Adequacy Requirement

The purpose of our analysis is two-fold. First, we differentiate bank's risk between the internal risk and the external risk. The internal risk is based on risk-based capital requirement and minimal capital adequacy requirement. The external risk is the factor uncontrollable but influence on bank efficiency. We take the bank's characteristics and macro-economic variables as external risk factors in this paper. The second important objective of our analysis is investigate the effect of Baselâ…¡on bank's performance.In this paper, we adopt DEA method and SBM method to estimate bank efficiency based on the information obtained from 14 banks in China for the period from 2005 to 2008.In the first stage, we employ the standard method of Basel II to calculate the risk as input variables for efficiency analysis. In second stage, we employ the BCC (Banker-Charnes-Cooper), SBM (Slacks-Based Measure), Super-Efficiency, and Super-SBM to estimate the scores relating bank efficiency which are incorporating account the internal risk. In third stage, we employ the three-stages DEA method to estimate the bank efficiency that is excluding internal risk and external risk. Finally, the un-discretionary variable model is employed to show the effect of Baselâ…¡on the scores relating bank efficiency.Our empirical results are summarized as follows:(1)The market risk is proven to be more important in recent years. The credit risk has the highest ratio of total risky capital, but the ratio has decreasing in recent years. Most the adjusted capital adequacy of China's banks are large than 8%.(2) The average efficiency scores of banks incorporating account the internal risk are significantly higher than those of banks not incorporating account the internal risk, but the ranks are not significantly difference.(3)It is not significantly that the efficiency scores of banks with more strictly capital adequacy requirement are lower capital adequacy requirement (4) China's commercial banking industry need to be paid high attention in non-operating income and risk management in order to improve the bank's profit.