Research On China’s Commercial Banks X Efficiency Based On SFA Method

In January6,2013, Banking Supervision of the Basel Committee announcedthe latest revision of the details on Basel agreement III. Now the international banksupervision is becoming stricter, there is no doubt that increases the difficulty of riskmanagement who is still in the stage of implementation of Basel II banks at home.As China’s commercial banks are facing more pressure that capital constraints isstronger and market competition is more combative, thus improving bank efficiencyhas become an effective means to enhance the core competitiveness. During theperiod of the regulatory environment and the pressure of competition having a greatchange, and as well as the computer technology in commercial banks is widely usedperiod, commercial banks should do: such as the streamlining of agencies lead tohigher cost efficiency; or researching the development of new products so as to getrid of relying solely on interest income source. We can see, it is has the very strongpractical significance if we can measure the level of efficiency of China’scommercial banks reasonably and the management of commercial banks can have agood reference to develop an appropriate management strategy.In this paper, based on the X efficiency theory, through the SFA model we usethe method of least squares and maximum likelihood estimation to estimate andinspect the X Efficiency Function, and We examine the efficiency of12commercialbanks since2001. In the input and output index selection, this paper use assetmethod to measure the X efficiency of commercial banks. The input indicatorsinclude interest payments, net value of fixed assets, operating costs and personnelcosts; and output indicators include loans, deposits and pre-tax profit.Compared tothe state-owned commercial banks and joint-stock commercial banks in the processof testing, the results showed that the overall level of commercial bank China Xefficiency is on the rise, but the state-owned commercial bank X efficiency overall islower than the joint-stock commercial bank efficiency. The actual contact withcommercial banks in the basis of empirical study, this paper put forward the policyrecommendations to improve the efficiency of commercial bank, including thetransformation of the deposit and loan marketing strategy, improve the financialsupervision system, optimizing the property right structure of state-owned banks andthe development of innovative financial products etc. The study is helpful to deepenthe reform of China’s banking industry and promote operation efficiency andprofitability of commercial banks.