Empirical Study Of The Efficiency Of Commercial Banking Institutions In Shandong Province

As the most important financial institution, bank will advance or restrict the development of the economy as a result of the high or low bank efficiency. The bank efficiency decides the competitive power of Chinese commercial banks in the international market directly, especially after China had joined WTO. It's useful for us to know the efficiency of bank in order to make policy to improve it. Shandong Province is one of the Great Economic Province in China, it's rapidly developing economy must be supported by the capital. It's necessary to improve the bank efficiency to ensure the economy develop in a sustained and steady manner. By Data Envelopment Analysis method, the paper measures the bank efficiency of Shandong Province, including 4 state owned commercial banks and 10 new established share-type commercial banks. And then we test the decisive factor which determines the commercial bank's efficiency by Tobit model. At last, we proposed some suggestions to the banking innovation of Shandong Province.This paper is organized into five sections. Section one covers a brief literature review of the bank efficiency. It mainly introduces the definition of bank efficiency and the research content in different period, including the conclusion of empirical analyses. Section two introduces the measuring methods of bank efficiency, especially the data envelopment analysis which is used in this article. Section three empirically analyzes the bank efficiency of Shandong Province. Empirical results suggest that the whole level of bank efficiency in Shandong Province is low, and the new established share-type commercial banks are better than the state owned commercial banks. Both kinds of banks show the scale inefficiency, especially the state owned commercial banks, which are all lie in the degressive return to scale. Section four analyzed the determinant factors empirically. The result in this paper proved that the assets quality, the ratio of deposit to loan and the ratio of return to assets have positive relations with bank efficiency. The ratio of expenses to assets, the percentage of intermediary business and the assets proportion have negative relations with bank efficiency, and the property right is not the decisive factor. Section five proposes corresponding suggestions to improve the bank efficiency of Shandong Province.