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X-efficiency versus Rent Seeking in Chinese banks: 1997-2006

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Author Info
Matthews, Kent () (Cardiff Business School)
Guo, Jianguang
Zhang, Xu

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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 10 joint-stock banks over the period 1997-2006. The paper adjusts for the quality of loans by treating NPLs as a negative output. The paper shows that Chinese banks have reduced cost inefficiency and reduced X-inefficiency at a faster rate than rent-seeking inefficiency.

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File URL: http://www.cardiff.ac.uk/carbs/econ/workingpapers/papers/E2008_26.pdf
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Publisher Info
Paper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2008/26.

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Length: 34 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:cdf:wpaper:2008/26

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

Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Laeven, Luc, 1999. "Risk and efficiency in East Asian banks," Policy Research Working Paper Series 2255, The World Bank. [Downloadable!]
  2. David Hauner, 2004. "Explaining Efficiency Differences Among Large German and Austrian Banks," IMF Working Papers 04/140, International Monetary Fund. [Downloadable!]
    Other versions:
  3. Dong, Fengxia & Featherstone, Allen, 2004. "Technical and Scale Efficiencies for Chinese Rural Credit Cooperatives: A Bootstrapping Approach in Data Envelopment Analysis," Staff General Research Papers 11992, Iowa State University, Department of Economics. [Downloadable!]
    Other versions:
  4. Allen, Franklin & Qian, Jun & Qian, Meijun, 2005. "Law, finance, and economic growth in China," Journal of Financial Economics, Elsevier, vol. 77(1), pages 57-116, July. [Downloadable!] (restricted)
    Other versions:
  5. Drake, Leigh & Hall, Maximilian J. B., 2003. "Efficiency in Japanese banking: An empirical analysis," Journal of Banking & Finance, Elsevier, vol. 27(5), pages 891-917, May. [Downloadable!] (restricted)
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