A Research On The Efficiency Of China’s Commercial Banks Based On The DEA Model With Factor Limited

The banking industry is dominant in the financial system in China,and the efficiency of commercial banks has been attracting wide attention. It not only reflects the ability of its resources allocation, but also reflects the level of its own steady operation. By virtue of its advantages in efficiency evaluation,DEA method is widely used to study the efficiency of commercial banks.This paper adopts DEA method to evaluate the efficiency of 17 Commercial Banks in China from 2007 to 2014, and suggestions for improvement of each decision making unit is given. With The rapid development of the financial industry and the competition between commercial banks is becoming more and more fierce,the result is conducive to improving the efficiency and competitiveness of commercial banks.Since 1995, our country has been strictly on commercial bank that loans and deposits ratio shall not exceed 75%,it was not until 2015 that the restrictions were expected to lifted.Since the DEA efficiency evaluation index system often involves the two indexes of the deposit and loan,we have to consider the constraint of loan to deposit when measuring the efficiency of commercial banks in the period of 1995 to 2015 years.That is to say, the projection value of the two indexes can not be changed without limitation.Most of the previous studies have neglected this provision, which may lead to the result that the research conclusion is not entirely consistent with the actual situation.Based on the above problems, the following research work is carried out in this paper:(l)Based on the scale of income,DEA model can be divided into four cases:the scale of income constant, variable scale returns, scale income non incremental, the scale of income is not reduced.The previous scholars have only explored the restricted DEA model of the variable scale returns,and this paper has given the constant returns to scale,variable returns to scale, non increasing returns to scale and non decreasing returns to scale DEA models with limited factor of four different situations,moreover,we extend it to generalized DEA.(2)At present, China has canceled the loan balance and the proportion of deposits shall not exceed 75% of the provisions, which is bound to change the business efficiency of commercial banks.However, the study of the efficiency of commercial banks does not take into account the impact of loan to deposit ratio on the efficiency of the bank.Based on the actual situation of our country, this paper calculates the real efficiency of China’s Listed Commercial Banks under the limited conditions by the DEA model with limited factors.(3)This paper also calculates the efficiency level of the commercial banks without the loan to deposit ratio,and then compare the results of the two groups, put forward a more objective and quantitative research on the impact of the abolition of the loan to deposit ratio on the efficiency of commercial banks.The innovation of this paper is to construct a generalized DEA model with limited factors, to measure the real comprehensive efficiency and technical efficiency of 17 Commercial Banks with the limitation of the loan to deposit ratio.Moreover,by comparing the results of the generalized DEA model with limited factor and the results of the traditional generalized DEA model, the quantitative analysis of the impact of the abolition of the loan to deposit ratio on the commercial banks. We can also analyze the impact of the abolition of loan to deposit ratio on commercial banks quantitatively.The research result shows that:(1)The efficiency of state-owned banks, stock banks and urban commercial banks is a gap, totally,the efficiency of urban banks is the highest, and the stock bank is the second, the efficiency of state-owned banks is the lowest.(2)The efficiency of state-owned commercial banks is increasing year by year, but the efficiency of the stock banks and city commercial banks is fluctuating,the efficiency gap between state-owned commercial banks and stock banks, urban commercial banks has been reduced. (3)The loan to deposit ratio of commercial bank is positively correlated with the efficiency, after canceling the loan to deposit ratio, the efficiency of commercial banks can be further improved,which shows that canceling the limitation of the loan to deposit ratio is in line with the actual situation of the development of China’s banking industry.At last,this paper puts forward policy suggestions about improving the efficiency of commercial banks according to the conclusion of the research,also points out the shortcomings and the future research prospects.