The Efficiency of China's Banking Industry and the Determinants

다국어 초록 (Multilingual Abstract)

The recent global financial crisis highlights the importance of a sound financial sector for economic development. This paper evaluates the economic efficiency of China's banking industry and investigates the determinants of this efficiency. Our analysis shows that the average economic efficiency of joint-stock commercial banks is highest, followed by the ‘Big Four’ state-owned commercial banks and city commercial banks. The economic inefficiency of these banks during the past 15 years was mainly caused by technical inefficiency, and this technical inefficiency was mainly caused by scale inefficiency. Using the scores of efficiency as dependent variables, the paper also comprehensively studies the impact of (1) the characteristics of individual banks, (2) the characteristics of the whole banking industry and (3) macroeconomic factors on banking efficiency. The results suggest a number of factors that banks can work on to improve efficiency and lend support to deepening reforms in the Chinese banking industry, including regulatory reforms that require capital adequacy in a more strict way, reforms that introduce more competition and, more broadly, reforms that aim at establishing institutions that can truly commercialize Chinese banks. Last but not least, the efficiency of banking depends on healthy growth of the overall economy.

참고문헌 (Reference)

1 Farrell, M. J., "The measurement of productive efficiency" 120 : 253-281, 1957

2 Kirkpatrick, C., "The measurement and determinants of X-efficiency in commercial banks in Sub-Saharan Africa" 14 : 625-639, 2008

3 Banker, R., "Some models for estimating technical and scale inefficiencies in data envelopment analysis" 30 : 1078-1092, 1984

4 Coelli, T. J., "Recent developments in frontier modeling and efficiency measurement" 39 (39): 219-245, 1995

5 Barth, J. R., "Prudential supervision: What works and what doesn’t" University of Chicago Press 31-88, 2001

6 Berger, A. N., "Problem loans and cost efficiency in commercial banks" 21 : 849-870, 1997

7 Charnes, A., "Measuring the efficiency of decision making units" 2 : 429-442, 1978

8 Andersen, T., "Financial liberalization, financial development and economic growth in LDCs" 15 : 189-209, 2003

9 Diamond, D. W., "Financial intermediation and delegated monitoring" 51 : 393-414, 1984

10 Altunbas Y., "Examining the relationships between capital, risk and efficiency in European banking" 13 (13): 49-70, 2007

11 Jackson, M., "Evaluating the technical efficiency of Turkish commercial banks: An application of DEA and Tobit analysis" University of Queensland 2000

12 Berger, A. N., "Efficiency of financial institutions : International survey and directions for future research" 98 : 175-212, 1997

13 Jemric, I., "Efficiency of banks in Croatia: A DEA approach" 44 : 169-193, 2002

14 Altunbas, Y., "Efficiency and risk in Japanese banking" 24 : 1605-1628, 2000

15 Koutsomanoli-Filippaki, A., "Efficiency and productivity growth in the banking industry of Central and Eastern Europe" 33 : 557-567, 2009

16 Kumbhakar, S. C., "Economic reforms, efficiency, and productivity in Chinese banking" 32 : 105-129, 2007

17 Fadzlan, S., "Developments in the efficiency of the Thailand banking sector : A DEA approach" 9 (9): 226-245, 2010

18 Grigorian, D. A., "Determinants of commercial banks performance in transition : An application of data envelopment analysis" 48 : 497-522, 2006

19 Carvallo, O., "Cost efficiency in the Latin American and Caribbean banking systems" 15 (15): 55-72, 2005

20 Fu, X., "Cost X-efficiency in China’s banking sector" 18 : 35-53, 2007

21 Ghosh, S. N., "Capital requirements and bank behaviour : An empirical analysis of Indian public sector banks" 15 : 145-156, 2003

22 International Monetary Fund, "Box 1.5: Gauging financial stability risks in China" 40-41, 2011

23 Aysan. A. F., "Assessing the adverse effects of interbank funds on bank efficiency through using semiparametric and nonparametric methods" Bogazici University 2009

24 Girardone, C., "Analyzing the determinants of bank efficiency : The case of Italian banks" 36 : 215-227, 2004