Study On Two-stage FDH Model And Its Application In Commercial Bank Efficiency Analysis

Banking industry is the core of the modern financial industry and the pivot of the national economy.The evaluation of the banking industry efficiency is an effective measure to improve the efficiency of the bank industry,and also an important means to supervise and guide the banks' operation.In the evaluation of bank efficiency,DEA method is a comparatively more common method.However,when evaluating the efficiency of banks,it is usually assumed that the production possible set may be a convex set,but in fact it is not possible to determine whether the production set is convex.The FDH method,based on the DEA method,relaxes the assumption that the production possibility set is convex.Therefore,it is more suitable to use the FDH method to evaluate bank efficiency.At present,the FDH efficiency evaluation method has not been involved in the multistage research,the single stage FDH model has taken the decision-making unit as a black box processing in the evaluation of bank efficiency.So it is difficult to find the root of the banks' inefficiency.Therefore,it is necessary to extend the single stage FDH model to a multi-stage framework,which can not only satisfy the evaluation requirements of the multi-stage systems whose real frontier are unknown,but also can deeply excavate the inefficient link and reason of the decision unit.Firstly,this paper reviews the related literatures on DEA,FDH and evaluation methods of bank efficiency,and expounds the basic theories of DEA and FDH.On this basis,two types of two-stage FDH production possibility sets are constructed with two different angles,the correlation properties of the production possible sets are studied,the equivalence of two production possible sets is proved,and the input-oriented two-stage FDH model is given.Next,referring to previous studies on bank efficiency and according to the business process of commercial banks,we divides this business process into two processes,absorbing deposit and producing profit.Based on two-stage FDH model and traditional FDH model,the overall and phased efficiency levels of 107 banks in five countries of China,USA,Germany,UK and France are measured respectively in 2010-2016.Finally,according to the meta-frontier method,the banks in different countries are grouped to analyze the environmental technology differences of different countri es.The results show that: The average efficiency of banking industry in China is ranked first in our sample period,and the efficiency value is much higher than that of other countries.Low efficiency in the deposit-taking stage is the main factor restricting the development of the banking industries in United States,France and Germany.Low efficiency in profit-making stage is the main factor restricting the development of British banking industry.During 2010-2016,the overall average efficiency of banks in all five countries are 0.428 and 0.655 under the meta-frontier and group-frontier framework,respectively,which indicates that the efficiency differences between the banks in China,America,Germany,Britain and France are obvious,and the French's banks have the biggest efficiency difference under this two frontier frameworks.From the angle of technology gap ratio,China has the biggest technology gap ratio,followed by US,the last is France.