A Study on Cost Efficiency and Factor Analysis of China Commercial Banks － An Application of Two-Stage DEA Model
Date Issued
2015
Date
2015
Author(s)
Liang, Meng-Ju
Abstract
China has been rapidly growing in past three decades. Banks play an intermediary role to hold the equilibrium between supply and demand of funds; they also earn the revenue by taking risks in financial market. Understand the operational efficiency of banks helps stabilize financial market and overall economic development. The purpose of this study is to investigate the cost efficiency of China banking sector in the past three years, and to find the critical factors relate to the cost efficiency. We use Data Envelopment Analysis method to estimate the cost efficiency of China''s banking sector in 2011-2013; the cost efficiency is disassembled into allocative efficiency and technical efficiency. In first stage, we used the Brown-Mood Test to determine whether there are differences in efficiency medians of State-Owned Bank, Joint-Stock Bank, City Commercial Bank, Rural Commercial Bank and Foreign Bank. Then we used Dunn''s Test of Multiple Comparisons to determine the sequence of the efficiency. In second stage, we used the Tobit regression model to find out the significant factors of cost efficiency, allocative efficiency and technical efficiency by controlling time, bank ownership and management variables.The results show that State-Owned Bank is the most cost efficient banks, and Rural Commercial Bank is the most cost inefficient banks. Joint-Stock Bank is the most allocatively efficient banks, and Rural Commercial Bank is the most allocatively inefficient banks. State-Owned Bank is the most technically efficient banks, and City Commercial Bank is the most technically inefficient banks. The scale efficiency of China banks show it has the difference returns to scale as the banks ownership difference. The results show that State-Owned Bank is the most cost efficient, Joint-Stock Bank is the most allocatively efficient, while Rural Commercial Bank is the most cost inefficient and allocatively inefficient at the same time; State-Owned Bank is the most technically efficient, and City Commercial Bank is the most technically inefficient among all categories. The scale efficiency of China banks shows different ownerships belongs to different return to scale stage. The critical factors of cost efficiency are Total Asset, Total Loan to Total Deposit Ratio, Liquidity Ratio and Cost to Income Ratio. The critical factors affecting allocative efficiency are the same with the cost efficiency. The critical factors of technical efficiency are Total Loan to Total Deposit Ratio and Liquidity Ratio. In order to achieve cost efficient, being allocative efficient is more important than technical efficient at China banking sector in 2011-2013.
Subjects
Chinese banks
Cost efficiency
Data Envelopment Analysis
SDGs
Type
thesis
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