The Empirical Research Of Efficiencies Of China’s Commercial Banks Based On Frontier Approach

Banking is at the core position of the financial industry in China, the total assetsof commercial bank is far greater than the total assets of the other financialinstitutions, and a stable financial system is very important to a country’s economicsteady development. Therefore, a sound and effective bank system is significant toChina’s sustainable development of economy. The efficiency of commercial banksrefers to the ability banks change their costs to profits, it is an important index usedto evaluate the operating situations of commercial banks, so the efficiency ofcommercial bank is one of the significant research fields to the regulators andacademe. In this dissertation, the research on commercial bank efficiency is dividedinto five parts:In chapter1, this paper reviews the literatures of bank efficiencies, and addressthe significance to continue research on the efficiencies of China’s commercial banksChapter2introduces basic theories of bank efficiency, and describes theconcepts and basic models of bank efficiency used in this paper in detail.In chapter3, this paper calculates bank efficiencies based on nonparametricmethod and chooses17commercial Banks’ public data from2009to2012assamples. By discussing the advantages and disadvantages of a variety of DataEnvelopment Analysis (DEA) method, this dissertation finally select supperefficiency DEA method to measure scale efficiencies and technical efficiencies of thesamples.Chapter4is about calculating cost efficiencies of17commercial banks basedon parametric methods. In this chapter, there are instructions of differences between some famous parametric methods, and will use Stochastic Frontier Approach (SFA)method to do the empirical analysis.Chapter5concludes the empirical results of chapter3and chapter4. Thisdissertation has four primary conclusions:(1) the scale efficiencies of China’scommercial banks show that the big-five state-owned commercial banks and mostjoint-equity commercial banks are in the decreasing returns to scale, meanwhile thecity commercial banks are in the increasing returns to scale;(2) the joint-equitycommercial banks are the best in the pure technical efficiencies, and the puretechnical efficiencies of the big-five state-owned commercial banks are at the bottomof the three bank classes;(3) the cost inefficiencies and random error keep the realcost curve away from the most effective frontier;(4) the cost efficiency of China’scommercial bank is in high level, and the efficiencies of three bank classes convergeover time. Based on these conclusions, some suggestions on improving level ofefficiency of commercial banks are listed at the end of this article.