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Evaluating the Effectiveness of China's Financial Reform The Efficiency of China's Domestic Banks

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  • Cheng Hsiao

    ()

  • Yan Shen
  • Wenlong Bian

Abstract

This paper estimates the cost and pro t e¢ ciency of Chinese domestic banking sector to evaluate the e¤ectiveness of Chinas nancial reforms since 1978. We use the performance of foreign banks as the benchmark because for- eign banks, subject to intensive worldwide competition, are perceived as pos- sessing superior governing structure and organization, more advanced technolo- gies and better trained labor force. On the other hand, competition in Chinas banking sector is mainly in the form of nonprice measures, thus putting foreign banks at a disadvantage. We nd domestic banks have gradually caught up the cost advantage of foreign banks in a manner consistent with the increased com- petitive pressure. On the other hand, the pro t advantage of domestic banks over foreign banks is widening because of institutional arrangements, cultural and social networks as well as the pro t scope and revenue scale economy.

Suggested Citation

  • Cheng Hsiao & Yan Shen & Wenlong Bian, 2016. "Evaluating the Effectiveness of China's Financial Reform The Efficiency of China's Domestic Banks," Working Papers 2016-02-21, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
  • Handle: RePEc:wyi:wpaper:002316
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    Cited by:

    1. Chen, Zhongfei & Matousek, Roman & Wanke, Peter, 2018. "Chinese bank efficiency during the global financial crisis: A combined approach using satisficing DEA and Support Vector Machines☆," The North American Journal of Economics and Finance, Elsevier, vol. 43(C), pages 71-86.
    2. Chen, Zhongfei & Wanke, Peter & Tsionas, Mike G., 2018. "Assessing the strategic fit of potential M&As in Chinese banking: A novel Bayesian stochastic frontier approach," Economic Modelling, Elsevier, vol. 73(C), pages 254-263.

    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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