Efficiency Of Chinese Commercial Banks Research Articles

Influencing Factors of Green Credit Efficiency in Chinese Commercial Banks

This paper is applied the Tobit panel model to analyze the driving factors of green credit efficiency by using Chinese commercial banks’ data from 2009 to 2019. Based on the undesirable-SBM-DEA model, this paper is attempted to construct the green credit evaluation index by incorporating carbon emissions, and evaluating the green credit efficiency of Chinese commercial banks. The result shows that the green credit efficiency of Chinese commercial banks is low currently. Moreover, there is a mutually significant relationship between the efficiency and profitability of commercial banks’ green credit funds. Our findings suggest that the commercial banks should pursue the scale of green credit capital and improve the efficiency of green credits to help China achieve carbon neutrality goals.

Finding the single efficient unit in data envelopment analysis with flexible measures

Efficiency evaluation is crucial for providing decision support in both target setting and competency recognition. In many practical applications, flexible measures that can be classified as either input or output often lead to inconsistent results due to distinct classifications. Conventional classification methods may identify many efficient decision making units (DMUs), which cannot provide us with the best alternative and reduces the discriminating power of associated models. In this study, we develop a novel integrated approach by identifying the single efficient DMU considering flexible measures. Specifically, our proposed approach guarantees the feasibility of the associated efficiency estimation model under relatively mild conditions. Moreover, the weight scheme and non-dominated classification result can be uniquely determined via a revised min-max computational procedure. We validate and illustrate the proposed approach by applying it to evaluate the efficiencies of Chinese commercial banks before and during the pandemic. Our findings suggest that the pandemic does have an impact on bank efficiency, and different banks respond differently to the pandemic shock. More specifically, the best-performing bank that stands out before and during the pandemic can be identified as a unique benchmark, and the others could learn from this alternative to mitigate the pandemic shock.

Analysis of Chinese Commercial Banks’ Risk Management Efficiency Based on the PCA-DEA Approach

As a special type of enterprises with high risks, Chinese commercial banks’ risk management plays an important role in banks’ business process. Measuring and improving the risk management efficiency of the Chinese commercial banking system has recently attracted increasing interest. Previous studies analyze the business performance of commercial banks from the perspective of the overall management level of banks, and few articles focus on the risk management ability of banks. This paper evaluates the technical efficiencies of Chinese commercial banks’ risk management by the DEA-BCC model with window analysis to come up with some recommendations for policy makers. The technical efficiency is then decomposed into pure technology efficiency and scale efficiency. According to the banking risk supervision indicators released by the China Banking Regulatory Commission, we choose the indicators of 26 commercial banks’ risk management during the period of 2011 to 2019. Principal component analysis (PCA) is applied to delete redundant input indicators. The paper gives a dynamic evaluation of technology efficiency, pure technology efficiency, and scale efficiency. The main empirical results are as follows: (1) the technical efficiency of Chinese commercial banks’ risk management is low, and the differences among three different types of banks are large. (2) The pure technology inefficiency of Chinese commercial banks’ risk management has become a key factor restricting the improvement of the risk management of the Chinese banking industry. (3) The Chinese commercial banks’ risk management faces a serious problem which is economies of scale. (4) The technical efficiencies of Chinese commercial banks’ risk management fluctuate greatly, and management capabilities need to be enhanced urgently.

Regulation adaptive strategy and bank efficiency: A network slacks-based measure with shared resources

Banks have two primary strategies for adapting to a regulation change in the era of big data which can be characterized as natural disposability and managerial disposability. Natural disposability implies a negative strategy by which a bank attempts to decreases its vector of inputs to decrease undesirable outputs. In contrast, managerial disposability indicates a positive strategy by which a bank considers a regulation change as an opportunity and adapt the regulation change by utilizing big data technology. The operational process of a bank can be decomposed into a productivity stage and a profitability stage. Furthermore, the operation costs, a shared resource, can be used to characterize natural disposability and managerial disposability. Based on natural disposability and managerial disposability, this paper proposes two network models to estimate the efficiencies of banks. To test their practical implications, the proposed models were applied to examine the efficiencies of Chinese commercial banks in the period 2014−2018. Our key findings are as follows. (1) There exist great disparities in the inefficiencies between two adaptive strategies. The inefficiencies are primarily driven by the profitability stage under natural disposability, whereas the inefficiencies are equally attributed to both stages under managerial disposability. (2) The efficiency differences among different types of banks are insignificant under natural disposability but are significant under managerial disposability. (3) Joint-stock commercial banks are more oveall efficient than state-owned commercial banks, city commercial banks and rural commercial banks, while state-owned commercial banks show worst practice for overall efficiency and profitability stage efficiency.

Fintech and Banking Efficiency: Evidence from Chinese Commercial Banks

Will the development of FinTech improve the efficiency of commercial banks in China? In recent years, FinTech has been continuously developing and applying to the financial industry which has brought opportunities and challenges to the operation and management of commercial banks in China. We focus on the empirical analysis of the impact of FinTech on the operating efficiency of commercial banks. By examining Chinese commercial banks as an empirical sample, we find that the development of FinTech has a significant role in promoting the efficiency of Chinese commercial banks. On this basis, we further compared the feedback of changes in the efficiency of different Chinese commercial banks to the development of FinTech. Accordingly, the efficiency changes of city commercial banks in China have been most significantly affected by the development of FinTech. Based on the empirical results, the financial development elements are further added to explore the geographical characteristics of city commercial banks. We find that the development of FinTech has a stronger effect on the efficiency change of city commercial banks in areas with higher levels of financial development.

The Global Financial Crisis, Fiscal Stimulus Package and the Chinese Banking Sector — A Pre- and Post-Efficiency Analysis

This study is the first to examine the impact of two recent key events on technical, cost and profit efficiencies of Chinese commercial banks — the 2007 Global Financial Crisis (GFC) and the subsequent Chinese Government’s 2009 fiscal stimulus package. Stochastic frontier analysis together with univariate and multivariate tests are used on a sample of 143 banks, including the big five, joint stock, city, rural and foreign, over the 2006–2013 period. Overall, there is substantial scope for improvement — cost efficiency could improve by up to 50%; technical and profit efficiencies by up to 30%. The effect of the crisis and the stimulus package on various overall and segment efficiencies is, at best, inconsistent and inconclusive.

The cost effects of shadow banking activities and political intervention: Evidence from the banking sector in China

In this paper, we examine how the shadow banking activities of Chinese commercial banks affect their cost efficiency. Furthermore, we investigate whether the relation between shadow banking activities and the bank cost efficiency changes across heterogeneous types of government political intervention in banks. We find that the growth of shadow banking activities has a significantly positive effect on the cost efficiency of Chinese commercial banks. In addition, evidence suggests that political intervention has detrimental effects on bank cost efficiency, which will weaken or dominate the positive relation between the growth of shadow banking activities and bank cost efficiency.

Research on the Impact of Internet Finance on the Efficiency of Chinese Commercial Banks

This paper selects 15 Chinese commercial banks as the research sample, using stochastic frontier approach, setting Trans-log Production Function. The paper firstly measures the efficiency of commercial banks, and the results show that the efficiency level of Chinese commercial banks is on the rise from 2007 to 2016, and the efficiency of state-owned banks is higher than that of joint-stock banks. Secondly, the paper studies the influence factors of the efficiency of Chinese commercial banks in the view of banks’ own factors, industry factors, Internet financial development factors. The results show that the non-performing loan ratio level and the Internet financial development are negatively related to the bank efficiency, and competition of market is positively associated with the bank efficiency, and the structure of property rights will also significantly affect the performance of commercial banks.

Analysis on the effects of government ownership on efficiency of Chinese commercial banks

This study, targeting the data of 75 Chinese commercial banks (2003-2016), verified the effects of government ownership on efficiency of banks by applying stochastic frontier approach (SFA). The main results of the empirical analysis are as follows. First, as a result of the analysis using stochastic frontier model, high capital ratio, low loan-loss reserve ratio, and low cost to income ratio had positive effects on profitability of banks. Net loan ratio had positive effects on profitability of only joint-stock commercial banks (JSCBs). Second, as a result of verifying efficiency determinants of banks, low government ownership, listed banks, and high asset growth rate and operating profit per employee had positive effects on efficiency of banks. The study results indicate that the inflow of private capital into Chinese commercial banks lowers government ownership, improving governing structure and efficiency through enhancement of supervisory function.

Analysis on the effects of government ownership on efficiency of Chinese commercial banks

This study, targeting the data of 75 Chinese commercial banks (2003-2016), verified the effects of government ownership on efficiency of banks by applying stochastic frontier approach (SFA). The main results of the empirical analysis are as follows. First, as a result of the analysis using stochastic frontier model, high capital ratio, low loan-loss reserve ratio, and low cost to income ratio had positive effects on profitability of banks. Net loan ratio had positive effects on profitability of only joint-stock commercial banks (JSCBs). Second, as a result of verifying efficiency determinants of banks, low government ownership, listed banks, and high asset growth rate and operating profit per employee had positive effects on efficiency of banks. The study results indicate that the inflow of private capital into Chinese commercial banks lowers government ownership, improving governing structure and efficiency through enhancement of supervisory function.

The impacts of risk-taking behaviour and competition on technical efficiency: Evidence from the Chinese banking industry

This paper tests the impact of risk and competition on efficiency in the Chinese banking industry over the period 2003–2013. Comprehensive types of risk-taking behaviour are considered including credit risk, liquidity risk, capital risk, and insolvency risk. Competition is measured by the Lerner index. The results are cross-checked using an alternative econometric technique as well as an alternative competition indicator. The findings show that the technical and pure technical efficiencies of Chinese commercial banks are significantly and negatively affected by liquidity risk. They further show that greater competition precedes declines in technical and pure technical efficiencies of Chinese commercial banks. The results suggest that Chinese bank efficiency is significantly affected by bank diversification, banking sector development, stock market development, inflation and GDP growth rate. The findings also indicate that, compared to state-owned commercial banks, joint-stock commercial banks and city commercial banks have lower technical and pure technical efficiencies.

Evaluating efficiencies of Chinese commercial banks in the context of stochastic multistage technologies

This paper proposes a stochastic network model under the framework of the stochastic frontier approach, which allows firms to produce outputs through multistage processes so that we can characterize the underlying technologies and assess technical efficiency in each subsector of a firm. Our model explicitly considers the links among subsectors and overcomes the failure of network DEA that fails to estimate the fractions of shared inputs employed by subsectors, when only aggregate data are available. We compile data from the Chinese banking industry over the period 2002–2015 to exemplify our approach with the help of copula methods. Under the assumption of two production stages - i.e., deposit-gathering and loan-expansion stages - we find that banks allocate roughly 59% and 61% of labor and capital, respectively, to collect deposits in the first stage and that the average technical efficiency scores in both production stages are respectively 68% and 84%. Our study supports the previous findings that joint-stock banks are the most technically efficient, while larger commercial banks, including the big four state-owned banks, are the least technically efficient.

The Impacts of Risk-Taking Behaviour and Competition on Technical Efficiency: Evidence from the Chinese Banking Industry

This paper tests the impact of risk and competition on efficiency in the Chinese banking industry over the period 2003-2013. Comprehensive types of risk-taking behaviour are considered including credit risk, liquidity risk, capital risk, and insolvency risk. Competition is measured by the Lerner index. The results are cross-checked using an alternative econometric technique as well as an alternative competition indicator. The findings show that the technical and pure technical efficiencies of Chinese commercial banks are significantly and negatively affected by liquidity risk. They further show that greater competition precedes declines in technical and pure technical efficiencies of Chinese commercial banks. The results suggest that Chinese bank efficiency is significantly affected by bank diversification, banking sector development, stock market development, inflation and GDP growth rate. The findings also indicate that, compared to state-owned commercial banks, joint-stock commercial banks and city commercial banks have lower technical and pure technical efficiencies.

Research on the Efficiency of Chinese Commercial Banks Based on Undesirable Output and Super-SBM DEA Model

Based on Super-SBM DEA model, this paper investigates the efficiency of 12 Chinese commercial banks from 2005 to 2013 under the consideration of undesirable output, and verifies the truth that considering undesirable outputs (non-performing loans) can make research result more authentic by comparing with the consequence obtained without considering undesirable output. On this basis, this paper takes a further advantage of Malmquist index to analyze Chinese commercial bank efficiency. The results show that the efficiency of Chinese commercial Banks mainly depends on technological progress. Therefore, that technological progress is the factor influencing the efficiency of Chinese commercial Banks should not be ignored. Finally, this paper puts forward some relevant proposals for Chinese banking sector to improve operational efficiency and promote the technological progress.

Measuring the efficiency of Chinese commercial banks: An analytical model and empirical validation

In this paper, DEA model is used with the panel data of 21 commercial banks gathered during period 2006–2014 to measure the technical efficiency, pure technical efficiency and scale efficiency of commercial banks in China. Furthermore, a regression model for the factors affecting the efficiency of commercial banks is established with three levels includes the banking industry structure, the micro-level of commercial banking, and the macro-economic performance. The results show that the improvement of market competition level is beneficial to promote the efficiency of commercial banks. The risk control capacity, business innovation capability, and foreign capital involvement have positive influence on commercial banks’ efficiency. The market share and scale efficiency are inversely proportional in large state-owned commercial banks. The market share and scale efficiency are proportional in joint-equity commercial banks and municipal commercial banks. The broad money supply growth rate has positive influence on commercial banks’ efficiency improvement.

A study of the relationship between employee wage and commercial banks efficiency in China

Purpose Efficiency of a commercial bank affects both its competitiveness and the role it plays in the process of economic development. Although great efforts have been exerted in developing the various aspects of banking efficiency, there seems to be a lack of research on examining the impact of the bank efficiency from the employee wage perspective. The mechanism of how employee wage affects commercial bank efficiency and the relationship between the two were analyzed in this paper. Based on the growing body of research on efficiency in banking, the aim of this paper is to examine if competitiveness of employee wages at any commercial bank has any impact on the bank efficiency score. Design/methodology/approach The method used was quantitative analysis, which was based on comparing the evaluated efficiencies of the banks with employee wages published in the bank reports. The empirical data in this paper were based on 16 Chinese listed commercial banks from 2004 to 2012. The per capita wage of commercial banks was selected as the wage indicator, and the efficiency value obtained by the slack-based measure (SBM) model was selected as the efficiency indicator. According to the calculated data, the Tobit regression model was built to analyze the relationship between employee wage and commercial bank efficiency. Findings The research results show that employee wage is the key variable that influences the efficiency of Chinese commercial banks, and the inverted U-shaped relationship between employee wage and commercial banks efficiency shows up. Practical implications The wage structure data of the composition of basic pay and bonus were not available at the time of conducting the research. Per capita wages were used instead to reflect the employee wage levels of Chinese banks. Originality/value This study can provide some help for the banking industry by analyzing the wage levels from the perspective of efficiency and also further enriches the theoretical system of the relationship between employee wage and bank efficiency.

Risk, Competition and Efficiency in the Chinese Banking Industry: Evidence from Stochastic Frontier Analysis and Three-Stage Least Square Estimator

Using a sample of Chinese commercial banks over the period 2003-2013, this paper tests the interrelationships between risk, competition and efficiency in the Chinese banking industry under a three-stage least square estimator. The paper is the first study comprehensively examining different types of risk-taking behaviours of Chinese commercial banks. The findings suggest that there are significant interrelationships between credit risk, liquidity risk, capital risk and efficiencies of Chinese commercial banks. In addition, it is found that higher levels of competition lead to lower cost and revenue efficiencies and there is a significant and positive impact of credit risk on bank competition. The results provide policy implications to Chinese government and banking regulatory authorities

Efficiency Research of Chinese Commercial Banks Based on Super-Efficiency DEA Method

This paper tries to analyze Chinese three types of bank’s efficiency changes and differences, after the financial crisis, through the integrated use of DEA and super efficiency DEA method. The results show that: the efficiency of Chinese commercial Banks in general is on the rise, the comprehensive technical efficiency growth stems mainly from scale efficiency improvement, pure technical efficiency is stagnant, and scale efficiency presents convergence among all kinds of banks, while the technical level is the core strength of banks’ current and future competition. State-owned banks with the technology competitive advantage and scale efficiency improved, began to catch up with other banks, reversed the operational inefficiency; City commercial banks due to the system advantage were more easily to be in the efficient production frontier surface.

Measuring slacks-based efficiency for commercial banks in China by using a two-stage DEA model with undesirable output

Bank industry plays a critical role in the economic development of China. In this paper, we develop a new two-stage data envelopment analysis approach for measuring the slacks-based efficiency of Chinese commercial banks during years 2008–2012, where the banking operation process of each bank is divided into a deposit-generation stage (division) and a deposit-utilization stage (division). In the approach, the increase of desirable outputs and the decrease of undesirable outputs are simultaneously considered in order to identify the inefficiency of a bank. Three efficiency statuses are first defined for such a system to investigate its input-output performance and divisional performances, and a full efficiency status is then defined based on these statuses. The empirical results show that the improvement of the banks’ performances during this period was mainly contributed by the improvement of deposit-utilization stage. Besides, the results also show that our approach can provide a benchmark for the intermediate measures of the two stages of an inefficient bank.

Production efficiency of Chinese banks: a revisit

Purpose – The last decade witnessed the reform of China's financial sector, during which Chinese commercial banks’ ownership and operation had been significantly changed in order to improve efficiency. The purpose of this paper is to investigates whether these banks have improved their productivity efficiency during their rapid expansion and growth in the post reform era from 2004 to 2011. Design/methodology/approach – Data envelopment analysis is used to investigate the production efficiency of Chinese commercial banks during 2004-2011. First, the technical efficiency (TE) score is constructed to evaluate bank productivity. The TE score is disintegrated into pure technical efficiency (PTE) and scale efficiency (SE) to examine the effects of technical factors and scale economies. Second, the Malmquist index is constructed to explore the year-by-year productivity. Lastly, regression analysis examines how bank characteristics and ownership structure affect productivity efficiency. Findings – The Big Four banks are less efficient than other commercial banks, and public banks are less efficient than private banks. The low efficiency is primarily due to scale inefficiency, rather than PTE. In addition, ownership structure impacts production efficiency. Specifically, foreign ownership is related to high efficiency while state ownership is associated with lower productivity. Research limitations/implications – There were small observations of public banks in China. Thus, a more comprehensive test is impractical to explore whether or not annual changes in ownership structure improve their production efficiency. With more date, such a test will reveal further information about the relationship between ownership and productivity. Originality/value – The authors are the first to assess the production efficiency of Chinese commercial banks after the recent financial reform during which Chinese commercial banks had undergone significant structural changes. The lower overall productivity of Big Four and public banks is a result of scale inefficiency, although these banks are better than their peers with respect to input-output transformation.