Operating strategies of banks in China: Analysis of operational and profitability efficiency

Abstract

This paper conducts a comparative analysis of banks operating in China using a two-stage model, which evaluates their operational efficiency (OE) and profitability efficiency (PE). The study period spanned through 2004 to 2006 and data envelopment analysis (DEA) was used in the study’s analysis. The results showed that large and older banks are generally more efficient than small and new ones in operational efficiency. However, while small efficient banks are easily used as benchmarks, large efficient banks are deemed as competitive niche players. This means that the large banks have better competitive power than the small ones. Key words: Data envelopment analysis, bank efficiency, two-stage, operational efficiency, profitability efficiency.