A Study On Estimating And Influencing Factors Of The Commercial Banks’ Efficiency In China

Commercial banks are the important part of China’s financialsystem, and their efficiency conditions will affect the efficientallocation of resources in the entire market. The study on commercialbanks’ efficiency is to help banks to determine input-output ratio inorder to achieve the optimal allocation of resources, provide thenecessary reference for regulatory authorities to assess the regulatoryeffect and adjust regulatory policies.In order to investigate the cost efficiency and profit efficiency ofcommercial banks, This article uses the stochastic frontier approach toestimate cost efficiency and technical efficiency of the sample bankswhich are China’s four state-owned commercial banks,13nationalshareholding commercial banks and86city commercial banks, the timespan2000to2010. The results show that (1) cost efficiency of thesample banks is generally better than profit efficiency, and the trend ofcost efficiency is relatively complex and profit efficiency is an upwardtrend in the sample period.(2) In the full sample, cost efficiency of citycommercial banks is the highest but shows a downward trend; costefficiency of listed commercial banks is lower than the non-listedbanks’, but the comparison result of their profit efficiency is justopposite.(3) In the sub-sample of listed banks, the cost efficiencytrends of three types commercial banks are complex and efficiencytrends of the city commercial banks is the most rapidly; In terms ofprofit efficiency, their efficiency levels show upward trends, andefficiency of state-owned commercial banks is the lowest.On the basis of efficiency measured, this paper uses STATA toanalyze the correlation between cost efficiency of the commercialbanks (and profit efficiency) and bank’s characteristic, market structure and macro-environmental factors in China. The results show that,(1)The relationship is significantly related,which between the commercialbanks’ efficiency and bank size, profitability, asset quality, ownership,listed status, market concentration, GDP growth, per-capita GDP andinflation rate etc.(2) The cost efficiency and profit efficiency ofcommercial banks both have time lag effects in China.(3) The resultsof random effects model show that the explanatory variables arebasically robust.Finally, combining of empirical results, this paper believes that wecan improve the cost efficiency and profit efficiency of China’scommercial banks through the following aspects: appropriately controlbank size to make use of existing resources; reduce non-performingloan ratio to control credit risk; strengthen the traditional businessmanagement, develop financial innovation of non-traditional business;speed up the shareholding reform process to optimize the ownershipstructure of commercial banks; reduce market concentration to promoteeffective competition.