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Technical efficiency in the Chinese banking sector

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  • Barros, Carlos P.
  • Chen, Zhongfei
  • Liang, Qi Bin
  • Peypoch, Nicolas
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    Abstract

    This paper applies an innovative DEA (Data Envelopment Analysis) model, the Inverse -convex model, in order to investigate the technical efficiency of a representative sample of Chinese banks. The banks are ranked according to their efficiency over the period 1998-2008. The results paint a mixed picture of the Chinese banks' performance. The influence of firm size and ownership on bank efficiency is not observed. However, the study shows that overall efficiency improved over time, especially after the entry of China into the WTO. Policy implications are derived.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 28 (2011)
    Issue (Month): 5 (September)
    Pages: 2083-2089

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    Handle: RePEc:eee:ecmode:v:28:y:2011:i:5:p:2083-2089

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    Web page: http://www.elsevier.com/locate/inca/30411

    Related research

    Keywords: China Banks -convexity Efficiency;

    References

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    1. Alvarez, Roberto & Crespi, Gustavo, 2003. " Determinants of Technical Efficiency in Small Firms," Small Business Economics, Springer, vol. 20(3), pages 233-44, May.
    2. Antonio Alvarez & Carlos Arias, 2003. "Diseconomies of Size with Fixed Managerial Ability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(1), pages 134-142.
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    4. Lin, Xiaochi & Zhang, Yi, 2009. "Bank ownership reform and bank performance in China," Journal of Banking & Finance, Elsevier, vol. 33(1), pages 20-29, January.
    5. Alicia Garcia-Herrero & Sergio Gavila & Daniel Santabarbara, 2005. "China’s banking reform: An assessment of its evolution and possible impact," Finance 0508010, EconWPA.
    6. García-Herrero, Alicia & Gavilá, Sergio & Santabárbara, Daniel, 2009. "What explains the low profitability of Chinese banks?," Journal of Banking & Finance, Elsevier, vol. 33(11), pages 2080-2092, November.
    7. James Laurenceson & Zhao Yong, . "Efficiency Amongst China’s Banks:A DEA Analysis Five Years after WTO Entry," EAERG Discussion Paper Series 1605, School of Economics, University of Queensland, Australia.
    8. Tarun Khanna & Krishna Palepu, 2000. "Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups," Journal of Finance, American Finance Association, vol. 55(2), pages 867-891, 04.
    9. Bonin, John P. & Huang, Yiping, 2001. "Dealing with the bad loans of the Chinese banks," Journal of Asian Economics, Elsevier, vol. 12(2), pages 197-214.
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    12. Ariff, Mohamed & Can, Luc, 2008. "Cost and profit efficiency of Chinese banks: A non-parametric analysis," China Economic Review, Elsevier, vol. 19(2), pages 260-273, June.
    13. Jiang, Chunxia & Yao, Shujie & Zhang, Zongyi, 2009. "The effects of governance changes on bank efficiency in China: A stochastic distance function approach," China Economic Review, Elsevier, vol. 20(4), pages 717-731, December.
    14. John Whalley, 2003. "Liberalization in China's Key Service Sectors Following WTO Accession: Some Scenarios and Issues of Measurement," NBER Working Papers 10143, National Bureau of Economic Research, Inc.
    15. Berger, Allen N. & Hasan, Iftekhar & Zhou, Mingming, 2009. "Bank ownership and efficiency in China: What will happen in the world's largest nation?," Journal of Banking & Finance, Elsevier, vol. 33(1), pages 113-130, January.
    16. Richard Podpiera, 2006. "Progress in China'S Banking Sector Reform," IMF Working Papers 06/71, International Monetary Fund.
    17. Fu, Xiaoqing (Maggie) & Heffernan, Shelagh, 2009. "The effects of reform on China's bank structure and performance," Journal of Banking & Finance, Elsevier, vol. 33(1), pages 39-52, January.
    18. Altunbas, Yener & Molyneux, Philip & Thornton, John, 1997. "Big-Bank Mergers in Europe: An Analysis of the Cost Implications," Economica, London School of Economics and Political Science, vol. 64(254), pages 317-29, May.
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    Cited by:
    1. Wang, Ke & Huang, Wei & Wu, Jie & Liu, Ying-Nan, 2014. "Efficiency measures of the Chinese commercial banking system using an additive two-stage DEA," Omega, Elsevier, vol. 44(C), pages 5-20.
    2. Matos, Pedro Verga & Faustino, Horácio C., 2012. "Beta-convergence and sigma-convergence in corporate governance in Europe," Economic Modelling, Elsevier, vol. 29(6), pages 2198-2204.
    3. Chang, Tzu-Pu & Hu, Jin-Li & Chou, Ray Yeutien & Sun, Lei, 2012. "The sources of bank productivity growth in China during 2002–2009: A disaggregation view," Journal of Banking & Finance, Elsevier, vol. 36(7), pages 1997-2006.
    4. Chen, Pei-Fen & Liu, Ping-Chin, 2013. "Bank ownership, performance, and the politics: Evidence from Taiwan," Economic Modelling, Elsevier, vol. 31(C), pages 578-585.

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