A Study On Cost Efficiency Of Commercial Banks In China Based On Non-parametric Cost Frontier

Finance in national economy has undoubtedly important position, and the economic crisis caused by financial effects is significantly and profoundly abnormal. Especially after the financial crisis, commercial banks'operating conditions will get more attention.Purpose of this study is to explore the cost efficiency of commercial banks, and on the basis of the excellent researches having been done before, use non-parametric cost frontier model to analyze the five parts of the fourteen commercial banks, which are the actual cost of the dynamic decomposition of allocative efficiency, technical efficiency, technological progress, output scale and factor prices. Also an empirical analysis of the impact of cost efficiency is provided, and will help the commercial banks to improve cost efficiency as a theoretical reference. The study will develop appropriate policy measures for its direction. Finally, countermeasures and suggestions to raise the cost of the efficiency of commercial banks will be offered, hoping to increase the cost efficiency of commercial banks, to improve the competitiveness and thus benefit the entire commercial banking sector stability and development.Firstly, the research background of the cost efficiency of commercial banks is introduced. From our country's economic environment to the global, from macro-economic level to the operation of the financial sector to the commercial banks, it is explained step by step. Secondly, the significance of the study on the cost efficiency of commercial banks is introduced, mainly from two aspects of theory and practice. And domestic and foreign research results are reviewed.Then, the theories about the efficiency of commercial banks are sorted out:the efficiency of classical economics theory, the efficiency of the new theory of classical economics, Keynes and the efficiency theory, Leibenstein and X efficiency theory, the efficiency of new institutional economics theory, etc.Thirdly, empirical research methods are used in this article, and so are the detailed description of the model. First, methods of measuring the efficiency of commercial banks, progressive approach are elaborated, especially under the panel data used in this model and panel data Malmquist index under the non-parametric cost frontier model description. Then, the detailed empirical analysis under the second part of the panel data set of multivariate statistical regression model is introduced.Fourthly, the empirical chapter is an important part of this paper, and it is mainly about Malmquist index model, non-parametric cost frontier model and the multivariate statistical regression model outputs show. Conclusions for each part are elaborated. The results show that from 1999 to 2009,14 commercial banks have raised actual cost, and it was only in 2007 after the outbreak of the financial crisis that the cost has fallen. This result is mainly due to the decline in output scale after the financial crisis in 2007, a relatively large contraction. That shows the commercial banks in the effectiveness of cost control are not satisfactory. The basic conditions are in the extensive management, and improving cost control has long way to go.The technological progress of the actual effect is the biggest factor in the change of cost. And it is followed by the scale factor prices and output, and finally the cost efficiency effect. This shows the on one hand, China's commercial banks should increase investment in technological progress, pay attention to technology and equipment operating costs for the important progress in reducing role. On the other hand, there is still cost-effective short-board; technical efficiency and allocative efficiency still have much room for improvement. For the factors of prices and output in the scale, the commercial banks should mainly pay attention to the reasonable expansion of the scale to avoid diseconomies of scale.In the empirical part of cost efficiency factors, the conclusion is that ownership structure, market concentration, deposit ratio, agency costs, interest rates, innovative ability and the size of loans and other elements of cost efficiency are significantly affected. The rate of allowance for doubtful loans, assets and the average yield on cost efficiency and the public have no significant effect.Finally, under the guidance of the theory, on the basis of the results for the empirical analysis, the paper sums up the measures and suggestions for China's commercial banks to improve the cost efficiency, wishes to provide a reference for policy-making departments.