A Study Of The Efficiency Of Chinese Commercial Banks Based On Stochastic Frontier Analysis

Since the end of2011, a hot topic discussed in China is the high profit of domesticcommercial banks. Public opinions are concentrated on (1) commercial banks get too highprofit;(2) commercial banks have no efficiency. However, public opinions about bankefficiency are kind of perceptual knowledge, grounded without extensive empirical data. Thispaper is to find out the efficiency of commercial banks in China.First of all, we make a systematic summary of current research trends in the West,focusing on the application of EVA efficiency model in researches.Second, summarize concepts of banking efficiency and highlight the core researchapproach--Stochastic Frontier Analysis.And then, introduce the EVA efficiency model to build an efficiency system, containingcost efficiency, profit efficiency and EVA efficiency, which roundly reflects the dynamicchanges trend of banking efficiency.We find (1) increase of three efficiency indexes since stockholding system reforms in2003;(2) coexistence of increase of cost efficiency and decrease of profit efficiency in Chinabetween2007and2009;(3) large gap between EVA efficiency and profit efficiency for a longtime, which illustrates unrealistically high profit and low value in China’s banking industry.At the end, we advance some proposals.