Research On Efficiency Of China’s Commercial Banks Based On Factor Analysis And Super-efficiency DEA

Since Chinese financial market has opened to the foreign banks, the operatingenvironment faced by the commercial banks in China has changed. Besides thecompetition from foreign banks, the commercial banking system in China is graduallychanging. The amount of small and medium banks keeps rising, and policy banks havealso turned to be market-oriented. Besides, lots of shadow banks participate in thecompetition, which intensifies the degree of competition in China’s banking industry.In order to be invincible in this fierce competition, our country’s commercial banksmust conduct reformation and innovation, and constantly improve the efficiency. Aswidely accepted, efficiency is one of the core propositions in economics. The studyabout the efficiency of commercial banks is the hot issue to academic circle and thebanking regulatory authorities.The traditional method of DEA is not a better solution on comparing the frontierbanks, so we introduce the super-efficiency model that can calculate the efficiency offrontier banks and solve this problem perfectly. However, input variables and outputvariables are limited by the hard constraint that the number of sample observations isat least two times more than input variables and output variables when we use thesetwo models. Besides, input variables and output variables must have a strongcorrelation. Aimed at the contradiction between comprehensive and too many inchoosing indexes, this paper applies factor analysis to improve SE-DEA, working outa measuring method which integrates both factor analysis and SE-DEA. We use thisnew model to estimate the efficiency of sixteen China’s commercial banks.Although the efficiency values we estimate show the situation of each commercialbank’s efficiency, it is of great theoretical value and practical significance to researchand analyze influence factors on the efficiency of commercial banks. This paperapplies Tobit model to analyze influence factors. In analysis, the dependent variable isthe efficiency scores in2012, and the independent variables are choosed from banksize, asset allocation, structure of property rights, asset quality, human resources andinnovation ability. The results show that: the X-efficiency of Chinese commercialbanks keeps the trend of rising on the whole, and the rising range of state-ownedcommercial banks is higher than joint-stock commercial banks in recent years, whilestate-owned commercial banks’ efficiency score is still lower than joint-stock commercial banks’; asset allocation and innovation ability have a positive correlationwith the efficiency of Chinese commercial banks, but structure of property rights,asset quality and bank size have a negative correlation with the efficiency of Chinesecommercial banks; what’s more, asset quality, bank size and structure of propertyrights are the three most influential factors in turn.