An Empirical Research On Efficiency Of Commercial Banks

Bank is a very important section in a nation's economy system. Whether bank's operation efficiency is high or low has deep effect on not only development of bank system but also operation of the whole nation's macro economy. But in China, it has many problems including low competitiveness, poor operation management, deficient finance innovation, too many bad debts, bigger and bigger bank risk in commercial banks. To solve these problems, banks'operation efficiency should be developed. By using Data Envelopment Analysis (DEA) and Malmquist Index approach, the efficiency change of China's commercial banks during the period of 1999-2003 was analyzed in this paper. From the literature researching the efficiency of commercial banks, we found that the method was mainly DEA. But it has some disadvantage in using DEA, because the efficiency comparison is always static. By using an Input-Oriented Malmquist Index approach, the dynamic efficiency of commercial banks can be analyzed. Malmquist Index can be decomposed into two components, which is technical progress and efficiency change.The main conclusion and achievements:1. By using DEA method, we make a conclusion that the scale efficiency is low of China's commercial banks during the period of 1999-2003.2. By using Malmquist Index approach, we make a conclusion that the Malmquist Index has been improved during the period of 1999-2003. The Malmquist Index mean value improved by 5.94%.3. Results showed that the efficiency growths of China's State-Owned commercial banks were accomplished mainly through efficiency change rather than technical change, but the ten others were on the contrary.Through the conclusion we have been made, we found that market centralization, organization structure, middle service and technical structure have great impact on the efficiency of banking industry in China. Based on the empirical results of this paper some significant propositions will be suggested and analyzed.