Dissertation > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Financial organizations, banks > Commercial banks ( specialized banks )

The Measurement of Operation Efficiency of China’s Commercial Banks

Author ZhengRong
Tutor WangChaoZuo
School Ningbo University
Course Quantitative Economics
Keywords commercial bank Efficiency DEA model panel model
CLC F832.33
Type Master's thesis
Year 2011
Downloads 55
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Since China adopted the policy of reform and opening up and joined the World Trade Organization in 2001, its financial industry has been more open.Especially more and more foreign banks enter into China’s financial market in recent years years. China’s commercial banks is now faced with unprecedented competition and challenges. However, China’s commercial banks still have many problems now that have affected the competitiveness of bank. Bank’s operating efficiency Mainly reflects the competitiveness of banks. In orfer to better meet the challenges and competition, China’s commercial banks should solve the problems and improve the operating efficiency.This paper resarches the changes of the efficiency of commercial bank and its influencing factors in recent years with data envelopment analysis method. Research is conducted from five parts. In the first part it discusses the background in which the efficiency of commercial banks is researched and its significance., introducs research situations on Banking Efficiency both at home and abroad. Next, It summarizes the basic meaning of bank efficiency and internal and external factors that affect operational efficiency of commercial banks on the basis of previous studies, and situation about China’s finance’s opening up. The third part introduces data envelopment analysis in detail , induct Malmquist index which is to measure changes in the efficiency based on the DEA model. The fourth part uses of the DEA models and Malmquist index analyses operating efficiency of 12 China’s commercial banks from 2001 to 2008. Part five use panel model to study the various factors on bank efficiency and its impact on the basis of empirical analysis. Finally, proposed some policy ecommendations based on empirical analysis of bank efficiency above.This study concluded that, from 2001 to 2008, Technical efficiency, pure technical efficiency and scale efficiency values of China’s commercial banks are rising in general. The efficiency of four old state-owned banks were significantly lower than that of emerging joint-stock commercial banks, particularly in the scale efficiency. It is clear that low technical efficiency is caused by low scale efficiency. Although the overall efficiency of China’s commercial banks are rising, technical efficiency, pure technical efficiency and scale efficiency values declined significantly in 2007 and 2008. This shows that after five years’protection of China’s financial industry,facing the pressure of the full liberalization of the financial industry and challenges, China’s commercial banks are slightly less competitive. Panel model regression results further validate the conclusions. At this stage the main factors which impact China’s commercial banks efficiency are micro factors, including the bank’s asset quality, asset cost rates and profitability. Currently, in the full liberalization of the financial industry environment, in the face of the foreign banks which have advanced management and technology Leadership, China’s commercial banks that want to improve their own efficiency and competitiveness of commercial banks should work hard to improve internal operating efficiency, increase non-interest income through innovation and improve the quality of bank assets, reduce asset costs rate.

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