The Efficiency Evaluation Of Chinese Trust Industry Based On Three-stage DEA Method

The trust industry and the banking, insurance, securities industry are known as the four pillars of modern finance. The trust companies have become the only non-banking financial institutions which can cross the monetary market, capital market and industrial investment market. The trust industry is playing a more and more important role in the financial markets recent years. Trust industry of our country recovered since1979, as a result of long time positioning error to its function, has experienced5times rectification in30years and finally return to the main business and comes into a better evelopment which has never been in the history, by the end of2012, China’s67licensed trust company has reached7trillion yuan, the total asset management business assets has been far more than the public fund industry, and catching up the insurance industry assets. However, due to the time range of the development of Chinese trust industry and our level compared with the level of developed country started late, and with times readjustment, trust company in China still has many bottlenecks restricting the development, therefore under this special background in China, the study for trust industry efficiency is really important.This paper based on the study of domestic and foreign related literature.Using the three-stage DEA method analyzes empirically the data of51trust companies during the period of2008-2011. Empirical results show that the level of our trust company efficiency is low, the trust industry is still in the primary stage of development, Extensive management can’t improve efficiency. The inefficiency of trust companies mainly comes from pure technical inefficiency. And there are gaps in efficiency between the trust company. Polarization is serious. The average efficiency fluctuates strongly and the ability of anti-risk is weak.Without a stable profit model and income structure. The efficiency is affected by the external environment, Increased market share、 stronger shareholder background、 longer established time、higher of the residents’consumption level can save the investment and improve efficiency. The higher regional financial employment wages can waste the investment and reduce efficiency.Based on the above analysis, this paper puts forward relevant policy suggestions:the trust companies should change extensive management to intensive management, and realize the connotative growth; developing the trust industry’s profit model and stabling the income structure; strengthening the trust companies’ internal control and preventing the operational risks. The government and the relevant regulatory authorities should improve the trust business law, and perfect the supporting system; strengthening the regulatory supervision, foster a good market environment.The innovations of this paper:first, the current research for the efficiency of financial enterprises generally concentrated in the banking, securities, insurance industry. There are few research focus on the trust industry. This paper has made a more comprehensive evaluation through theoretical and empirical analysis on the efficiency of the trust industry. Second, China’s current assessment of the efficiency generally using the traditional DEA method, the traditional DEA method of can’t eliminate the influence of the exogenous variables to the efficiency value. This paper use three-stage DEA method to exclude the environment variables and random error influence on traditional DEA efficiency value, overcome the limitations of linear programming model. Studying in a relatively fair perspective. Third, the past research awlays with a small sample size of the short time, this article choose the data of51trust companies during the period of2008-2011.The shortcomings of this paper:first, although trust industry data more transparent now, most data can be found in the yearbook of China’s trust industry. China trustee association website and trust company annual reports. However, the source is still insufficient to find the best data, resulting in some parameters cannot be found directly, so it can only be replaced by other relevant data, for example for the human capital can only use the number of workers to replace. Second, Lacking for considering the secondary environmental factors, there are many factors that can influence the efficiency of the trust companies, their effects on the efficiency of the trust companies have different way and degree. The article only analysis the main environmental factors and ignores some secondary factors, therefore affect the objectivity of efficiency.