Cross-evaluation Of Commercial Bank Cost Efficiency In Heterogeneous Environment

The financial industry is a pillar industry of a country.The development level of the financial industry has a great influence on the country's overall economic level.With the rise of Internet,the challenges faced by the traditional banking industry are becoming more complicated.How to reduce costs,improve business performance,and increase profitability is an important issue.Bank efficiency is a ratio,a comprehensive indicator of input and output,and an index that reflects the level of bank competitiveness.Considering the heterogeneity of decision making units,using the improved data envelopment analysis methods to evaluate the cost efficiency of commercial banks can enrich the research methods of bank cost efficiency to a certain extent,and have certain guiding significance for management practices.The research of this paper is mainly carried out through three steps: First,retrieve the literature related to bank efficiency,cost efficiency,and DEA,and study and summarize these literature.There are the three problems in the existing literature: First,without considering the differences among banks,all decision making units were put together for evaluation and all banks were considered homogeneous.Second,when the number of decision making units is small,the resolution of existing cross efficiency models is still low and traditional model cannot be completely sorted.Third,the original model only considers the amount of input without considering the input price,and cannot objectively reflect the overall cost of the decision making units.Then,in order to make up for these vacancies,this paper divides decision making units from different perspectives and proposes a cost efficiency estimation model based on cross evaluation between groups according to the input prices.The proposed model and measurement method mainly includes three main innovations: First,a method for grouping decision making units based on neighborhood mutual information is proposed,and secondly,a method for assigning weights to the decision making units based on latent information functions is proposed.Third,considering the heterogeneity of decision making units,a new model for cross evaluation between groups is constructed.Finally,the proposed method is applied to the empirical study of 16 commercial banks in China in 2012-2016.By determining indicators and collating data,to analysis the difference of cost efficiency of different banks anddifferent types of banks from horizontal and vertical,as well as the changes in cost efficiency of the same banks and same types of banks in different years.The research results of this paper show that from the perspective of research methods,according to the results of the neighborhood mutual information grouping,the five large joint-stock banks belong to the first group in 2012-2016.The three city commercial banks all belong to the third group.And some small and medium-sized joint-stock banks with lower input costs will be divided into the third group.And from the analysis of the trend of cost efficiency and the disparity between different banks under the two methods,we can see that there is not much difference in the results of the two methods.This shows that the improved neighborhood mutual information grouping is reasonable for grouping decision making units.In addition,from the results of the comprehensive cost efficiency of each group,the results of the weighting of latent information functions and the arithmetic mean are also basically consistent,indicating that the method of assigning weight to the decision unit by potential information functions is also feasible.From the empirical results analysis,small and medium-sized joint-stock banks and city commercial banks have higher cost efficiency than large-scale joint-stock banks,and the gap between the small and medium-sized joint-stock banks and city commercial banks is not large.The main reason is the cost of the large-scale joint-stock banks is too high,and the conversion rate of its output is lower.Judging from the relative ranking of the cost efficiency of the 16 banks,the rankings are basically the same in different years.The CCB(China Construction Bank)and ICBC(Industrial and Commercial Bank of China)in the large-scale joint-stock banks rank slightly higher,and the SZPAB(Shenzhen Ping An Bank)and SPDB(Shanghai Pudong Development Bank)in the small-sized joint-stock banks have higher rankings.From the change of 16 commercial banks in 2012-2016,the trend of cost efficiency changes of 16 banks is inconsistent,but most banks have improved in the past one or two years.