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Bank Efficiency in China, Rent Seeking versus X-inefficiency: A non-parametric Bootstrapping Approach

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  • Matthews, Kent

    ()
    (Cardiff Business School)

  • Guo, Jianguang
  • Zhang, Nina
  • Wang, Lina

Abstract

This study demarcates cost-inefficiency in Chinese banks into X-inefficiency and rent-seeking-inefficiency. A protected banking market not only encourages weak management and X-inefficiency but also public ownership and state directed lending encourages moral hazard and bureaucratic rent seeking. This paper uses bootstrap non-parametric techniques to estimate measures of X-inefficiency and rent-seeking inefficiency for the 4 state owned banks and 11 joint-stock banks over the period 1997-2004. In contrast to other studies of the Chinese banking sector, the paper argues that reduced inefficiency is an indicator that the competitive threat of the opening up of the banking market in 2007 has produced tangible benefits in improved performance. This paper finds evidence of declining trend in both types of inefficiency.

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Bibliographic Info

Paper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2007/4.

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Length: 39 pages
Date of creation: Feb 2007
Date of revision: Mar 2007
Handle: RePEc:cdf:wpaper:2007/4

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Keywords: Bank Efficiency; China; X-inefficiency; DEA; Bootstrapping;

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