The Research on Efficiency of Commercial Banks Based on Network DEA Approach -- Empirical Evidence from Chinese Commercial Banks

Abstract

The paper evaluates technical e‐ciency, pure technical e‐ciency and scale e‐ciency of 13 commercial banks for the period of 2009-2011. DEA model considers deposit as intermediate variable, i.e. both as input and output element, which is better than traditional DEA approach because traditional approach always has di‐culty in deciding deposits as input or output when evaluating bank’s e‐ciency. The empirical result shows: (i) Chinese banks are less in∞uenced by flnancial crisis than other countries. The technical e‐ciency is at relatively high level and keeps climbing; (ii) 4 state-owned commercial banks have lower technical e‐ciency than joint-stock banks, but they have no lower pure technical e‐ciency than joint-stock banks, and actually they perform rather stably; (iii) The technical ine‐ciency of Chinese banks is more caused by scale ine‐ciency, which now is becoming the leading reason. On the basis of e‐ciency ranking of commercial banks and the reasons of low e‐ciency of commercial banks, we also discussed some policy suggestion on improving the e‐ciency of Chinese commercial banks.