The Empirical Research On The Profit Efficiencies Of Listed Commercial Banks In Risk-adjustment In China

The commercial bank is a financial intermediary that allocating the idlecapital in society. Its efficient operation is directly related to the utilization of financialresources in society. Therefore, there is a theoretical and realistic significance on theresearch on the measurement of profit efficiency and the risk factors of the commercialbank. This paper employs the modified stochastic frontier approach of the parametermethods, which is in Fourier flexible form, and introduces the risk indicator Z-score tothe Battese and Coelli (1992) model to estimate the profit efficiency and marginal impactof the risk factors of16commercial banks in China from2003to2012. Based on theempirical result, this paper indicates that the asset price, the loanable capital price and theother earning assets are positively correlated with the profit efficiency of the commercialbank. Meanwhile, the risk indicator and effective total loans are negatively correlatedwith it. This paper makes analysis on the causes and trend of the profit efficiency of thecommercial bank, and compared the efficiency of the state-owned, the joint-equity andcity commercial banks that listed in the stock market in different groups. The resultindicates that there is a negative correlation between profit and risk factors of differentcommercial banks and it has an increased tendency over time. The risk factors have effecton the profit efficiency of the joint-equity banks more stably than the state-owned ones,and converge on the approximate value, gradually. However, that of city commercialbanks has steadily reduced. According to the conclusions, this paper provides somepolitical suggestions to Chinese commercial banks about how to control risk factors andimprove profit efficiency.