A Semi-parameter Method For Efficiency Evaluation Of City Commercial Banks

Bank efficiency, as a comprehensive index to measure the performance of banks, is an important tool for effective evaluation of the competitiveness of banks. At present, the competition between city commercial banks and state-owned banks and other forms of bank is becoming increasingly fierce. Through the evaluation of city commercial banks efficiency, it will conducive to reforming and restructuring of city banks, constantly optimizing the efficient allocation of resources, improving the efficiency operating performance of city commercial banks, and ultimately enhancing the comprehensive competitiveness of city commercial banks.In order to measure and evaluate the city commercial bank efficiency, we established semi-parametric boundary model with external environment on and basis of economic, financial and mathematical statistics. In this model, let the non-parametric part be the input, the parameter part be the external environment, and let inefficiency loss and random disturbance as random error, with a skewed distribution. Moreover, we gave the estimation method which contained three main steps:firstly, using least squares local linear estimate method to solve the regression equation of the model; secondly, using the pseudo-likelihood estimation method to estimate the two distribution parameters in random error, with one-dimensional search optimization method to seek precise result; finally, using of the method Jondrow et al. raised to obtain the technical efficiency.As the application of the model, we used the operating data of27city commercial banks from2007to2010for empirical analysis. Respectively, let total deposits at the end of the year, total loans and pre-tax profit be outputs, annual operating expenses and net fixed assets be inputs, and selected per capita GDP of cities and the ratio of the added value of tertiary industry accounted in city’s GDP, as indicators reflecting the level of city development. According to the results, the ranks of technical efficiency were shown. And we found that, the technical efficiency of city commercial banks was overall low, and the operating performance of city commercial banks was heavily influenced by local economic development, in which, the ratio of tertiary industry added value accounted in city’s GDP was especial notability. According to the empirical analysis results, the semi-parametric frontier model with a linear part of environmental impacts fitted well with the operating conditions of the city commercial banks, and the calculation showed that, the given solution method is easy to implement, and with accurate and reliable results. It was not only able to estimate the efficiency of the banks’ management, and also shown the magnitude of the effect of environmental factors on bank operating results.In short, the semi-parametric frontier method we built, combining the advantages of parameters methods and non-parametric methods, has a wide range of adaptability. It can estimate the bank’s management efficiency, and can estimate the impact of environmental factors on bank operating, and also with a calculation easy to implement and accurate.