Font Size: a A A

X-Efficiency Of Commercial Banks In China

Posted on:2005-09-04Degree:MasterType:Thesis
Country:ChinaCandidate:K ChangFull Text:PDF
GTID:2156360122497988Subject:Finance
Abstract/Summary:PDF Full Text Request
This study has three main objectives: (1) to estimate the technical and allocative efficiency, and X-efficiency (here refer to cost efficiency) of Chinese commercial banks, (2) to investigate whether the cost efficiency of China banking systems has improved in recent years, (3) to evaluate the determinants of this three types efficiencies. 14 commercial banks are involved in the sample and Two-Step approach has been used. The overall, technical and allocative efficiencies were measured using Data Envelopment Analysis (DEA). The regression model was used to determine the factors influencing efficiency and ANOVA was performed to find the difference in efficiency of state-owned 'Big-Four' and other banks. Bootstrapping technique is applied in regression analysis to overcome the data-generating problem of DEA efficiency scores.The examination of X-efficiency in banking has important public policy implications in China and the assessment of banks efficiencies is necessary. Berger et al. (1993) found that X-efficiencies account for around 20% or more of costs in banking. However, scale and product mix inefficiencies, when accurately estimated, are usually found to account for less than 5% of the costs.Despite the importance of efficiency studies, the literature on efficiency in Chinese banking is limited. While Scholars do many qualitative analysis to illustrate the logic how state-owned ownership or other institutions induce inefficiency, very few quantitative works have been undertaken to evaluate the efficiency scores of banks in China.My logic is: first, using X-efficiency method to test the opinion holding by scholars and public, that is state-owned banks are more inefficiency than others and the ownership is determinant. Conclusion supports this opinion. Second, explain how the state-owned ownership causes the inefficiency. This qualitative part is considered as the complementary of the previous empirical part and extends the debate.Three main conclusions emerge from this study. Firstly, the efficiency of Chinese banking as whole makes obvious progress during the tested term. Domestic bank efficiency is below the world mean efficiency and banks need to improve it further so as to achieve world best practice. 'Big-Four' banks are indicated more inefficient than others. To be specifically, allocative and scale inefficiencies account most of the overall inefficiency. It7implies that deregulation should carry on. The regression models show state-owned ownership is the only significant factor driving efficiency down. So the ongoing reform that to turn state-owned bank to joint stock bank should have a bright future.There are 10 chapters. The first two are introduction and review. Chapter 3 and 4 explain the concept of X-efficiency and DEA methodology.In chapter 5 and 6, the empirical study is undertaken to analyze X-efficiency of commercial banks during 1997 to 2002. Malmquist Index shows that the total efficiency of banks has been improved in this duration. The mean X-efficiency score has risen from 0.63 to 0.83, standard deviation has dropped by 15%.Bootstrapping method is applied in chapter 7 to examine the factors driving efficiency. The regression analysis shows that ownership is the only statistically significant one influencing efficiency. Besides, ANOVA shows state-owned banks are significantly less efficient than other banks.Chapter 8 presents some theories such as dynamic inconsistency, corporate governance and comparative advantage, which complete the logic how ownership influences efficiency.Chapter 9 put forward suggestion and chapter 10 concludes.The highlights are: Combining qualitative analysis and quantitative analysis, the author resort to international prevailing research method to investigate commercial banks in China. By contrast with previous domestic papers in this field, this paper pays more attention to the technical details in choosing input and output variables in DEA analysis and choosing independent variables in regression. Besides, bootstrapping method is used to resol...
Keywords/Search Tags:Bank Efficiency, X-Efficiency, DEA Analysis, Bootstrapping, Ownership, Corporate Governance.
PDF Full Text Request
Related items