Efficiency Measurement Of Chinese Commercial Banks Using Multi-output Production Frontier

Efficiency improvement is positive for banks to imrove internationalcompetitiveness and promot rapid development. It has been a hot research how toestimate the efficiency of commercial banks effectively. The main methods are SFAand DEA now. Both methods have advantages and disadvantages. The advantage of amethod is another’s defect. SFA takes into account both mathematical relationshipbetween input and output and random errors. Comparing with DEA, it has stongerresolvability. But SFA can only be used to analyze a single production,which greatlylimits the scope of the method’s applicationBecause of the drawback that SFA is limited to a single output, this paper presentsa multi-output SFA model with the production theory, optimization and randomsampling. To illustrate the usefulness and effectiveness of the new model, it tood thedata of16listed commercial banks in China during2005to2011as a sample tomeasure the overall efficiency with the new method and verify the validity of the newmethod. At the same time, combining with tradional SFA model which measures asingle-output efficiency, the research analyze and study the evolution and change of theefficiency of China’s commercial banks.