Nonperforming Loans and Productivity in Chinese Banks, 1997-2006
A bootstrap method for Malmquist index estimates of productivity growth is constructed with appropriate confidence intervals. This paper adjusts for the quality of the output by accounting for the nonperforming loans (NPLs) on balance sheets and tests the robustness of the results by examining alternative sets of outputs. The productivity growth of state-owned banks and joint-stock banks is compared, and the determinants are evaluated. It was found that the average productivity of Chinese banks improved modestly over this period. Adjusting for the quality of loans by treating NPLs as an undesirable output, the average productivity growth of the state-owned banks was zero or negative, while the productivity of the joint-stock banks was markedly higher.
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Volume (Year): 42 (2009)
Issue (Month): 2 (March)
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- Matthews, Kent & Guo, Jianguang & Zhang, Nina, 2007. "Rational Inefficiency and non-performing loans in Chinese Banking: A non-parametric Bootstrapping Approach," Cardiff Economics Working Papers E2007/5, Cardiff University, Cardiff Business School, Economics Section.
- Matthews, Kent & Guo, Jianguang & Zhang, Xu, 2008. "X-efficiency versus Rent Seeking in Chinese banks: 1997-2006," Cardiff Economics Working Papers E2008/26, Cardiff University, Cardiff Business School, Economics Section.
- Alam, Ila M Semenick, 2001. "A Nonparametric Approach for Assessing Productivity Dynamics of Large U.S. Banks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(1), pages 121-139, February.
- Mukherjee, Kankana & Ray, Subhash C. & Miller, Stephen M., 2001. "Productivity growth in large US commercial banks: The initial post-deregulation experience," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 913-939, May.