Stochastic Frontier Approach And Its Application On Measuring Efficiency Of Commercial Banks

The efficiency research is the continuously matter of concern in the economic. This paper introduces one kind of the representative efficiency measure parameter approaches——Stochastic Frontier Approach. The paper mainly divides into two parts. One part is theoretical, the other is empirical.The theory part systematically summarized cross-sectional data model, panel data model and cost efficiency model in the SFA. The parameter estimate, the technical efficiency expression derivation and the model test are presented. Four distributions of inefficiency term that are half normal distribution, truncated normal distribution, exponential distribution and gamma distribution are integrated into general distribution model. According to empirical analysis, the result shows that the impact of inefficiency term distributions on the efficiency measurement is slight. This is an important conclusion in the paper. Moreover, the paper researches whether the form of production function has an impact on measuring efficiency in SFA. The author use Cobb-Douglas production function and translog production function to measure technical efficiency in panel data and cross-section data respectively. The Spearman rank correlation test is provided at the same time. The empirical result indicates that the value of measuring efficiency is different between two production functions, but the impact of production function on the rank of efficiency is slight.The author firstly uses Stochastic Frontier Approach to measure operation efficiency of 13 commercial banks Beijing branches. The measurement result indicates operation inefficiency of Beijing's commercial banks exists in fact. Efficiency of Beijing's commercial banks are dramatically different. Efficiency of two Beijing local banks is lower. Furthermore, the paper researches the relationships among the operation efficiency of 6 shareholder-owned commercial banks and capital adequacy ratio, non-perferming loan ratio, asset scale, ownership concentration ratio, ownership balance ratio, etc. Some suggestions are proposed in improving commercial banks'efficiency and enhancing international competition power.