Empirical Study Of Chinese Commercial Banks In Terms Of Economies Of Scale

The study on economies of scales of banking industry is conducted on the purpose of rational decision-making and effective management not only on theoretical level but also in practices for commercial bank as well as supervisory department.The result of this study shows that some of the biggest overseas banks have reached the economies of scale but some of them are not in fact. According to the operating profit before provisions and other indicators in 2003, Chinese stated-owned commercial banks also have this pattern or features. However, this study takes different approach comparing with others. It evaluates the economies of scale of commercial banks in terms not only of their scopes of operations, but also of their distributions, the population of employees and technological investment. Especially for stated-owned bank subsidiaries and joint-stock banks in Guangdong province, they are distinct in the average employment population of branches. As a result, it must be paid attention to that some outcomes of domestic researches have certain discrepancies in enlargement of banks' economies of scales so as to reflect rationally that the situation of economies of scale does match its theoretical model. This study is conducted by means of fieldwork, multianalysis and statistical analysis methods to find out the development situation of economies of scales of stated-owned banks and joint-stock banks in Guangdong province from1995to 2004. The results indicate that the economies of scales of commercial banks in Guangdong province can be interpreted as Exponential curves and curves of the scale have not formed to be the optimized interzone of economy of scale. So, it is confident to say that commercial banks have much potential to develop in terms of the economies of scales. Moreover, commercial banks ought to concern on fixing the price, developing the online banking and improving their service qualities etc.