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State Ownership, Foreign Minority Shareholders, and the Efficiency of Chinese Commercial Banks

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  • Xiaohui Hou
  • Kuoping Chang
  • Qing Wang
  • Cheng Li

Abstract

In this paper, we estimate the technical and allocative efficiency of Chinese commercial banks using both the stochastic frontier analysis primal system, a parametric method, and minimum convex input requirement set, a nonparametric approach. The effects of state ownership and the introduction of foreign minority shareholders (IFMS) on these two types of efficiency measures are also studied. Under both sets of efficiency estimations, the empirical results consistently show that state ownership has no significant effect on the allocative efficiency of Chinese commercial banks, and no significant negative influence on the technical efficiency of these banks. IFMS helps Chinese commercial banks to eliminate the constraints from some ossified institutions and optimize input combinations. These effects significantly enhance allocative efficiency, but exert no considerable influence on technical efficiency.

Suggested Citation

  • Xiaohui Hou & Kuoping Chang & Qing Wang & Cheng Li, 2013. "State Ownership, Foreign Minority Shareholders, and the Efficiency of Chinese Commercial Banks," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(S2), pages 70-90, March.
    • Handle: RePEc:mes:emfitr:v:49:y:2013:i:s2:p:70-90
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    Cited by:

    1. Jiaying Fan & Kai Wang & Lidong Wu, 2023. "Monitoring the Type I Agency Problem or the Type II Agency Problem? Directors Appointed by Non-State Shareholders and the CEO Turnover–Performance Sensitivity," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(7), pages 2160-2189, May.
    2. Ming-Feng Hsu & Kehluh Wang, 2014. "The Level and Stability of Institutional Ownership and Firm Performance: Evidence from Taiwan," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(2S), pages 159-173, March.
    3. Ming-Feng Hsu & Kehluh Wang, 2014. "The Level and Stability of Institutional Ownership and Firm Performance: Evidence from Taiwan," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(S2), pages 159-173.
    4. Adugna Lemi & Ian Wright, 2020. "Exports, foreign ownership, and firm-level efficiency in Ethiopia and Kenya: an application of the stochastic frontier model," Empirical Economics, Springer, vol. 58(2), pages 669-698, February.

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