An Empirical Study Of Efficiency Of Small Commercial Bank

The rise and down of financial has great influence on the real economy. The reform of small commercial bank has become more and more important with the breaking out of the financial crisis in 2008 and series of economic stimulus policies in China. To reform small commercial bank has come to the government's agenda. What is the efficiency of small commercial banks like in china when the financial situation turns out to more and more competitive day by day in the world . How to position themselves and how to improve the core competitiveness is a urgent question for the small commercial banks in china who is still wondering? This problem does affect the development of small commercial banks in china, but it also related to the balance of Chinese economy. The small commercial banks in china have a deep relationship with the small company in china, especially the private enterprise. So we study the efficiency of small commercial banks in china in order to open a way for the reform of banks.There are five parts in my paper: first, we tell the meaning and the background of our paper, second, we introduce some model and theory we used. Third, we have a empirical study of Chinese small bank .we analysis the result, too. Forth, we made some suggestion to the small commercial banks in china. Finally, we summarized the full text, and give our conclusion.Many new problems has emerged in china when the financial crisis broke out. The development of small commercial banks is one of these problems which is more important than others. So we start our paper. Some scholars committed to the development and construction of theoretical models, trying to find the most useful model to measure the bank efficiency. Other scholars are dedicated to the use of different banks through the collection of data to testing the efficiency of banks and in order to find a specific regional bank operating rules which can guide the development of banks. In China, our study also limited the use of existing models. Many scholars had make some empirical study on the Bank in China. However, the study of small banks in china are very little. so we have some study on Chinese small banks.The efficiency of banks refers to the ratio of input and output of banks under normal circumstances. There are a narrow definition and a broad definition about the definition of The efficiency of bank, but we use the narrow one. The Measurement of the efficiency of bank including two: one is financial indicators method, the others is Frontier efficiency method. Frontier efficiency method includes parametric frontier method and nonparametric frontier method. We use non-parametric frontier data envelopment analysis. The direction of the banks efficiency concludes input oriented and output oriented, we have chosen input oriented. We are using input oriented DEA to measure the bank efficiency. DEA established efficient frontier with a method of a linear programming approach in order to measure the sample banks'efficiency .The model we used are CRS,VRS.Empirical Study is point of the article. In third section, we selected 23 banks as samples which concluded 11 large scale commercial banks to build the efficiency frontier. We chose three inputs and two outputs. We got the results of technical efficiency, pure technical efficiency, scale efficiency, scale efficiency status (ascending or descending) of 23 banks. And, we also presented 23 additional banks'assets, input redundancy table. First, we classified banks into large banks and small banks, then we discussed banks according to areas.Finally, we come to the conclusion :In technical efficiency, large commercial banks are more efficient , and more stable than small commercial banks; large and small technical efficiency of commercial banks up and down with the same phenomenon. In the small commercial banks, Hunan bank is inefficient; the commercial banks in South China are efficient; the bank in Heilongjiang Province has high efficiency score,But the banks in Jilin Province has very low score; the banks in southwest has low score, too.In pure technical efficiency, large commercial banks has higher score than the pure technical efficiency of small commercial banks, but the difference was not significant; large commercial banks are far more than stable than small commercial banks; In 12 small commercial banks, the pure technical efficiency of Hunan banks is generally, as opposed to their technical efficiency, better performance; the pure technical efficiency of the three banks in southern China are generally; Qishi bank in Heilongjiang province is in the middle of pure technical efficiency, Daqing banks and Mudanjiang bank of firms have good pure technical efficiency; four banks in Jilin Province have opposite performance in pure technical efficiency, two banks have high score and the other two has low scores; Chongqing bank has low score in pure technical efficiency .In scale efficiency, the efficiency of large commercial banks is higher than the small commercial banks; the efficiency of small commercial banks e depends on their size, the larger the size the higher the efficiency, and vice versa, the lower; in scale efficiency case, the large commercial banks are generally at the state of decreasing returns to scale, small commercial banks are increasing returns to scale all the time.The main problem that the small banks are facing in China is: the policy environment, risk control, strategic positions.Small commercial banks are at a disadvantage situation in the market, they needs more support policy from the government. The risks of Small commercial banks are increasing; To recruitment talent, to increase the technology of risk control, and to strengthen risk awareness are the most urgent measures that the small commercial banks should take; the small commercial banks should take advantage of its small and flexible . to distinctive the features and the differentiation of the road will create their own unique core competencies in order to find their own place in the market.