Study On The Relationship Of Performance, Market Structure And Efficiency Of Commercial Banks In China

The2008global financial crisis and the following European debt crisis caused enormous impaction China’s real economy, but the China banking sector, whose goals serving the real economy, has flourished, however, with the2011full-year net profit exceeded1000billion Yuan. But such a result obtained by China banking sector is not because of its perfect market structure and higher operation efficiency, but its long-term existence of monopoly market structure. Also as China’s opening-up process accelerate and the financial sector’s openness continue to increase, our country’s banking industry must change its traditional high monopoly and low efficient business model, and improve performance, in response to the impact of international capital inflow.At present, most study about the relationship among banking market structure, efficiency and performance is usually based on the two major classical hypotheses in the industrial organization theory whose are the’ market-power hypothesis’ and the ’efficiency-structure hypothesis’. This paper selected16China’s current major commercial Banks’ latest panel data between2004to2011as our empirical research samples, in order to analysis the relationship between market structure, efficiency, and the performance in China banking. In terms of market structure, this article selects the market share and relative concentration (HHI) as indicators for analysis; In terms of efficiency structure, this paper uses data envelopment method (DEA), and selects shareholders’ equity, employee number and deposit as input indicators, pre-tax profit as the output indicator, using input oriented method to measure the sample of16banks’ DEA efficiency from2004to2011.Different from the previous studies, this article built empirical analysis model on the market power hypothesis and the efficiency structure hypothesis respectively for regression, and found that none of the two hypothesis is established in China banking. But we also found that China banking market concentration exist significant negative correlation relationship with Banks performance, while bank efficiency shows significant positive correlation with performance, thus it provides empirical evidence for our country’s current deepening reform of the banking market structure and its management system. At the same time, it also suggests that China’s continuing effort to reduce the state-owned Banks’monopoly power over the years, increase the degree of competition between Banks, actively promote the state-owned Banks and joint-stock Banks to go public, and enhance the efficiency of the bank is right and has also received obvious effect.