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Risk management and managerial efficiency in Chinese banks: A network DEA framework

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  • Matthews, Kent

Abstract

Risk management in Chinese banks has traditionally been the Cinderella of its internal functions. Political stricture and developmental imperative have often overridden standard practice of risk management resulting in large non-performing loan (NPL) ratios. The training and practice of risk managers remain second class compared with foreign banks operating in China. This paper surveys Chinese bank risk managers and constructs metrics of risk management practice and risk management organisation. The metrics are used as intermediate inputs in a Network DEA framework to produce a measure of income efficiency. A statistical test is carried out to assess the importance of the risk metrics in evaluating bank income efficiency.

Suggested Citation

  • Matthews, Kent, 2013. "Risk management and managerial efficiency in Chinese banks: A network DEA framework," Omega, Elsevier, vol. 41(2), pages 207-215.
  • Handle: RePEc:eee:jomega:v:41:y:2013:i:2:p:207-215
    DOI: 10.1016/j.omega.2012.06.003
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    References listed on IDEAS

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    Keywords

    Risk management; Risk organisation; Managerial efficiency; Network DEA;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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