The Impact Of Government Implicit Guarantee On Commercial Bank Efficiency Of China

For the financial stability and financial security of any country, the level of banks' development is crucial, banks efficiency will directly affect the whole social financial resources disposition. The implicit government guarantee is a real presence, but easy to overlook factor that do put influences on the commercial banks, especially state-owned banks. On the one hand, the government gave banks a long-term "backing", so that commercial banks can operate boldly, which seems to be a positive factor for the bank, but on the other hand, implicit government guarantee mechanism allows commercial banks not fear to engage in high-risk business projects, totally neglect the risk analysis, and pursue high profits, thereby the ability of these banks to control the risk declined, leading to a series of problems such as decline in the quality of bank assets, accumulation of bad debts. This article investigating is just under this context, and this paper will deeply analysis the relationship between the implicit guarantee of government and efficiency of commercial banks, the paper selected 16 listed banks,these banks are the backbone of China's banking industry, so they can represent the overall situation of the entire banking sector.First, The paper describes the related theories and methods of implicit government guarantee and bank efficiency, analyzing the evaluation of China's banking industry and the current development status of 16 listed commercial banks in China. Then using the Contingent Claims Analysis technique to estimate the value of implicit government guarantees of the 16 listed banks throughout the year of 2007 to 2014, on the basis of the implicit government guarantees,the paper then add the factor of implicit guarantees to the banks' cost-efficiency model and profit efficiency model, which consist of three factors- assets return ratio,asset expense ratio and bad debt ratio. And then the paper measure 16 listed banks 2007--2014 year cost efficiency and profit efficiency values from the perspective of input and output under the background of implicit government guarantees. Last, we use regression model to measure the relationship between implicit government guarantees and bank efficiency. The empirical results show that, in the context of the government's implicit guarantee, cost efficiency and profit efficiency value of state-owned banks were lower than the joint-stock commercial banks, the coefficient of implicit government guarantee on bank efficiency show a small figure, but implicit government guarantee bring a significant negative impact on cost efficiency and positive impact on profits efficiency.Possible innovations of this paper is the research perspective, we see the implicit government guarantee as a variable impact, and we explore its impact on the bank efficiency; in addition,when we analyze the mechanism of how government implicit guarantee influence the banks efficiency, we propose three transmission mechanisms,include signaling mechanism, dynamic mechanism and competition mechanism.this could be another theory innovation of the article.