Research On The Commercial Banks' Efficiency Based On Data Envelopment Analysis

Efficiency is the centralized reflection of the competition ability of commercial banks,which is the key element to preclude financial risks and open up the banking industry. Theresearch on the banking efficiency has been one of the main issues for the internationalfinancial sector and every supervisory authority over the last two decades. The efficiency ofChinese commercial banks aims at minimizing the input and maximizing the output. That isto say economizing the cost input farthest or promoting the maximization of returns. Withthe commercial reform and the establishment of commercial banks as well as the entry offoreign capital banks, the competition environment of the banking system formsgradually. Efficiency has been the reality that commercial banks can't avoid. Compared withspeed and extensive operation, efficiency is a more profound issue. In the long term, thedevelopment of the banking industry depends not on speed but on efficiency.The paper compares the advantage and disadvantage of two kinds of approaches ofmeasuring bank efficiency on the basis of conclusion of foreign and domestic researchdocuments. The paper uses the.Data.Envelopment.Analysis (DEA) approach to measure thetechnology efficiency, pure technology efficiency and scale efficiency of 14 commercialbanks in China from 1996 to 2003. The comparison between the state-owned bank andshare-hold bank, and the multiplied index comparison in one bank let us have a general viewover the management efficiency of every bank and the difference between the factual valueand the theoretical value. Then the econometrics model is put forward. Taking the efficiencyvalues computed as the dependent variables. In the final part, some advices for thereformation of Chinese banking are presented. Based on the analysis of the paper, we canhave a further knowledge for the operation and development of the bank.