An Empirical Study On The Efficiency Of China's Listed Commercial Banks Under The Constraint Of Non-Performing Loans

With the continuous development of China's financial industry, the role of the banking sector in the financial markets become increasingly prominent. After the 2008 global financial crisis, the development of China's banking sector presents new challenges. Combined with Basel Third and the China's actual situation, the CBRC raised new regulatory requirements. The efficiency of commercial banks is worth study. At the same time, the economic situation of our country changes, the deterioration in asset quality pose a threat to the robustness of China's commercial banks. As of the fourth quarter of 2015, the amount of Non-Performing Loans was 1274.4 billion and the ratio of Non-Performing Loans was 1.67%. Therefore, the study on the efficiency of commercial banks under the constraint of Non-Performing Loans is more worth.China's listed banks, as the representative of China's commercial banks, have a more standardized business. So this paper select the relevant data of China's major commercial banks listed and make an empirical analysis to identify the factors affecting the efficiency of the bank. Especially in this current environment that the amount of Non-Performing Loans continues to grow, to identify the strengths and weaknesses of China's listed banks under the restriction of Non-Performing Loans and put forward a valid opinion maybe more representative for the study of the efficiency of commercial banks.This article will use the relevant data from 2007 to 2014, such as the interest income, non-interest income, pre-tax profit, non-performing loan, labor, net fixed assets of the listed commercial banks to combine with SBM-Undesirable model to measure efficiency.This paper is divided into six parts:Part 1.Through a review of domestic and foreign literature, I believe that domestic and foreign scholars have been more in-depth study on bank efficiency issues, whether it is on the factors affecting or research methods. However, many literature ignores the impact of Non-Performing Loans to commercial banks efficiency. Moreover, in the method of quantitative study, mostly followed the DEA, SFA method, there are very few people use SBM-Undesirable model to measure efficiency. Therefore, this article will examine the efficiency of listed commercial banks under the constraint of Non-Performing Loans.Part 2. Commercial bank is a institution to counterbalance benefits and risks. Non-Performing Loans is the risk of commercial banks since the birth of the commercial banks. Although the formation of non-performing loans related to economic cycles, but mainly related to the development of China's commercial banks. After a brief review of the development process of China's commercial banks, this article will describe the state of Non-Performing Loans.Part 3. This section reviews the theories about the efficiency. The thought of efficiency divided into five stages which result in a number of efficiency theory. To undertake the thought of efficiency, efficiency of commercial bank try to achieve minimizing(maximizing) in input(output). It is also relative and microcosmic efficiency.Part 4. This section describes the model about CCR model, BCC model, SBM-Undesirable model and the advantages of SBM-Undesirable model. The static method to estimates the efficiency of commercial bank include the method named DEA. Through linear programming, this method seek for the most effective DMU with multi-output and multi-input by solving the equation.The emphasis of this paper is the efficiency of listed commercial banks under the constraint of Non-Performing Loans. However, the CCR model and the BCC model do not take Non-Performing Loans into account and they can only estimate the total value of inefficiency. Therefore, in respect of commercial bank efficiency measurement methods, this article uses the SBM-Undesirable model to calculate the total value of inefficiency and its decomposition amount.Part 5 is the empirical study on the efficiency of China's Listed Commercial Banks under the constraint of Non-Performing Loans. This article will use the relevant data from 2007 to 2014, such as the interest income, non-interest income, pre-tax profit, non-performing loan, labor, net fixed assets of the listed commercial banks to combine with SBM-Undesirable model to measure efficiency and its decomposition amount.In the static efficiency analysis, the value of inefficient in the national joint-stock commercial bank is greater than the value of inefficient in the state-owned commercial bank from the overall inefficiency. The number of invalid bank in the national joint-stock commercial bank is more than the value of inefficient in the state-owned commercial bank. So the national joint-stock commercial bank have more serious inefficiencies operation than the state-owned commercial bank. In the dynamic efficiency analysis, TFP growth of state-owned commercial bank is less than the joint-stock commercial bank, which is contrary to the conclusion of static efficiency analysis, but this is not contradictory. Joint-stock commercial bank have can not avoid these problems, such as the imperfect institutional settings, the immaturity structure and the lack of loyal customers. Therefore, compared with the state-owned bank, there may be current inefficiencies. However, the progress of the joint-stock commercial bank is better than the state-owned commercial bank.Part 6. This part is the conclusion and suggestion after calculating the model in the empirical study of this paper. For the part of the empirical findings, this part conclude some conclusions about the efficiency of the listed commercial banks. This part also highlight that the adjustment of Non-Performing Loans, pre-tax profit, non-interest income, fixed assets play a key role in improving the efficiency of the commercial banks. At the same time, we also put forward some suggestions for these problems, we hope that the banks improve the efficiency of the bank with their own way.