The Study On The Efficiency And Affecting Factors Of Chinese Commercial Banks

Commercial banks are the significant elements of the financial system and play a fundamental role to the economic and social development. The study, therefore, on the efficiency of commercial banks, the analyses of factors influencing the efficiency, as well as feasible recommendations on the efficiency have already been among primary topics in the academics and industrial world.The present researches on the measurement and the influential factors of commercial bank's efficiency would not only provide commercial banks with empirical data for allocation of resources and management strategies, but also provide regulatory authorities with the theoretical basis. It has significant meaning to the restructuring, development and stabilization of banking industry in China.Though the studies and researches on bank efficiency have made rich achievements at home and abroad, the lack of comprehensive evaluation of Chinese commercial bank efficiency, the insufficient of research methods and lacks of theoretical analysis are main deficiencies. Especially, the analyses and researches on commercial bank's efficiency after the joint-stock reform and how the financial crisis in2008affects the banking efficiency should have been caught more attention. This paper discusses the commercial bank's efficiency and the factors affecting the efficiency from three points. Firstly, five state-owned commercial banks and nine joint-stock banks, which represented the overall level of Chinese commercial banks, were chosen to evaluate the performance of banking efficiency from2004to2011. During that range of time, a series of major reforms and transformations occurred in banking system in China, such as market-oriented reform, joint-stock reform, introduction of strategic investors, construction of Company management, global financial crisis in2008and so on. All these events have significant influence to the banks of China. Second, this paper pays much attention to Comprehensive research methods. The techniques using to analyze the measurement of efficiency include parametric method, non-parametric method, DEA-Tobit Model, Dynamic GMM Estimate, etc. Thirdly, this paper claims importance to the Carding and generalizing of efficiency theory. It generalizes Connotation, Origin, Developing and Various schools of thought of Efficiency Theory, etc.According to the research ideas, the present dissertation includes the following seven chapters:The first chapter is to introduce the backgrounds of the research. The significance of the paper is revealed from both theoretical and practical worlds. Also, the structure and methods of the thesis is introduced, as well as the may-called innovation.The second chapter is the literature reviews, including the researches on bank efficiency and related factors at home and aboard divided by different time periods and diversified methodologies. Also the defects of these studies are pointed out in this part.The third chapter discusses the theories and the methodologies of banking efficiency. The author defines efficiency, describes the development of the efficiency theory, and summarizes the relevant researches. The author finally introduces various methodologies and their own scope of application in the last part.The fourth chapter is to measure Chinese commercial banking efficiency basing on the non-parametric method. The author applies DEA of the non-parametric method to measure the technical efficiencies and Malmquist TFP of commercial banks in China.The fifth chapter is to measure the efficiency of Chinese commercial bank with the parametric method. The researcher uses SFA of the parametric method to build the logarithmic function of Battese and Coelli(1995) bank efficiency valuation model, with the purpose of verifying Chinese commercial banks'cost and profit efficiency.The sixth chapter is about the empirical study on the relevant factors of banking efficiency, in other words, the author focuses on analyzing and testing related elements of commercial banks' technical efficiency, cost and profit efficiency from the empirical perspective.The last chapter is the conclusion of the whole paper. The researcher concludes by the study above. Meanwhile, the author gives the feasible suggestions to enhance the efficiency of commercial banks in china, with targeting the defects of the present study and proposing the further direction of the future research.According to the whole research, and through efficiency measurements and corresponding empirical analysis, we draw the following basic conclusions.(i)Technical efficiency, pure technical efficiency and scale efficiency of Chinese commercial banks are relatively high since2004, almost each annual efficiency value is above0.9. The annual efficiency presents a fluctuated trend, but the fluctuation is modest. The technical efficiency, pure technical efficiency and scale efficiency of joint-stock banks are higher than those of state-owned banks. Although the financial crisis of2008has no effects on the scale efficiency of banks in china, it evidently promotes the improvement of pure technical efficiency, thus a improvement of the technical efficiency.(ii)The TFP of China's commercial banks has a constant improvement between2004and2011. There was a growing trend in most of those years. The TFP of commercial banks increased by6.2%during8years, among which technical efficiency grew by5.2%, efficiency change index rose by1.2%. This shows that technology plays an important role in improving Chinese commercial banks' efficiency, and the improvement of efficiency has a less effect. Compared to joint-stock banks, state-owned banks had a lower TFP before2008. However, the TFP of state-owned banks was above that of joint-stock banks after2008. It mainly relies on the changes of efficiency of state-owned banks.(iii)The cost and profit efficiency of Chinese commercial banks have been being increasing since2004, data shows that the series of commercial bank reforms have promoted the ability of cost controlling and profits creating. And, the global financial crisis has a bad influence on the cost and profit efficiency of Chinese commercial banks. Specifically, the pro-cyclical existing in cost and profit efficiency constrained by the economic environment and macro policy have a great effect on Chinese commercial banks' management and business structure. The cost and profit efficiency of joint-stock banks is much higher than that of state-owned banks. However, efficiency and the changing trend of individual banks differ greatly.The cost efficiency is slightly higher than the profit efficiency, etc.(iv)The technical efficiency is influenced by the banks themselves rather than the banking market structure and macro-economic environment Returns on assets, LDR and financial innovation are significantly positively related to technical efficiency, while Assets rate, non-performing loan ratio and bank size are negatively related to it. But, there is no significant correlation between Ownership structure and technical efficiency. And the cost and profit efficiency mainly depends on market structure and macro-economic factors. The fair market competitive environment, higher market share, easy monetary policy and great capital market could benefit the improvement of cost and profit efficiency.The paper would be innovative in the following aspects:(i)Theoretical analysis. This paper has carded and generalized Connotation, Origin, Developing and Various schools of thought of Efficiency Theory. And it also compensates for insufficient theoretical analysis of previous studies on efficiency of Bank.(ii)Research perspective. This paper applies DEA of non-parametric method from both static and dynamic angle, but existing literature rarely use the same research methods.(iii)Research methodology. This paper uses DEA efficiency valuation model and SFA model in both non-parametric and parametric methods to measure Chinese commercial banks efficiency. Furthermore, the author applies DEA-Tobit model and dynamic panel GMM estimation model to analyze the relevant factors affecting bank efficiency, and it avoids the probable problems with the least squares regression estimation and other traditional methods.(iv)Research conclusion. The research concludes that cost and profit efficiency shares the obvious pro-cyclical trend, and joint-stock banks react more sharply to economic cycle than state-owned banks, which indicates that the market-orientation of the former is more deeply than the latter.