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Gauging the Efficiency of China’s Bank Using a Cost Efficiency Model

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  • Chen Chunying

Abstract

Most studies on data envelopment analysis arrive at efficiency values that are too similar to be compared. Using a “cost efficiency model†, we gauge the efficiency of China’s banks by analyzing 25 listed banks from 2001 to 2016 to resolve this issue. The results show that the efficiency value of each bank has been clearly differentiated. Moreover, we determine that the banks’ efficiency would only improve by lowering the number of employees, reducing payroll, or increasing loans and making investments to generate higher revenues. Additionally, owing to policies in favor of the development of rural areas, certain rural commercial banks increased their efficiency and gradually displaced urban counterparts in terms of operation efficiency in 2016. JEL Classifications Numbers: G21, D24

Suggested Citation

  • Chen Chunying, 2019. "Gauging the Efficiency of China’s Bank Using a Cost Efficiency Model," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 9(5), pages 1-11.
    • Handle: RePEc:spt:apfiba:v:9:y:2019:i:5:f:9_5_11
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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