Assets Scale Optimization Research For Chinese Listed Banks Under The Constraint Of Input-output Efficiency

Bank size is concerned by the academic and the banking sector, at the same time, size optimization is also one of the major issues in the academic and banking sector. Research of Chinese listed banks assets optimization under the constraint of efficiency can show asset size optimization direction and help bankers decide assets scale, which is important for the security and stability of banking.The research is as follows. Logical starting point is established by relevant literatures, while input and output matrices are constructed by classifying them newly in commercial banks. In accordance with the optimization principles, the listed bank assets optimal theoretical model is set up, which is divided by two sub-models. These sixteen listed Chinese commercial bank assets sizes are optimized based on the input and output constraints in reality.By integrating finance, management, systems, statistics and economics, and using systems science methods, the theory model of bank assets optimization under the constraint of input-output efficiency is set up. Furthermore, assets are included directly in composited DEA that input and output are functioned of the assets by exploratory method. Literature research methods and experience summarization method are used in modeling and classifying. Descriptive research method shows the evolution of the assets, and quantitative analysis method solves measurement problems about the sub-models and optimization.The main ideas are as following. Theoretically, the optimization model of bank asset scale under the constraints of input-output efficiency is constructed. Methodologically, the data envelopment analysis is developed by incorporating the assets factor into inputs and output models. In practice, the evaluation and optimization recommendations of bank assets are given. In empirical, the panel frontier regression is proposed tentatively, and regression model is introduced to optimize the model.There are three conclusions included. Firstly, the assets optimization directions are different. The four biggest banks need to downsize, while the others need expansion. While Industrial and Commercial Bank, Agricultural Bank of China Construction Bank faced decreasing returns to scale, so it is necessary to reduce the size gradually. If these banks were on expansion,there would be at the expense of technical efficiency. Othe other hand, Bank of China could continue expanding in limited range. Medium-scale banks faced scale economies, and need to increase overall production efficiency, as well as the assets. While small-scale banks also need to expand the scale in order to achieve constant returns to scale, then the overall mixing efficiency would improve. In brief, asset optimizing follows the rule that the biggest four scaling down and the other scaling up.Secondly, the assets optimization tips for the listed banks under current macroeconomic environment are as follows. When economic growth declines, the four biggest banks need to increase the adjusting speed of the assets, but it would has little influence on the efficiency as there is more growth of social performance than the declination of input and profit. Bank of Communications, China Merchants Bank, Industrial Bank, Shanghai Pudong Development Bank, CITIC Bank, Minsheng Bank should be serious in the attitudes toward the economic downturn, and even take the measures of downing the expanding speed, reducing found outside, enforcing management, and keeping efficiency. Everbright Bank, Ping An Bank, Huaxia Bank, Bank of Beijing, Bank of Nanjing, Bank of Ningbo has small scale which makes them flexible, and easy to adjust, so they could also achieve scale asset optimization objectives in bad macroeconomic situation. Although the banks would increase interest expenses if tight monetary policy were taken, it almost has no influence on liquidity, and scale optimization. The only thing is just enforcing management and fighting risk ability. Furthermore, the floating of exchange rate has little influence on the optimization outcome because of Chinese listed banks’ inherent special nature. Thirdly, optimization proposals for the assets differ from the situations of banking profit margins narrowing. For the cost of capital rising in banking, the four biggest banks should reduce assets scale significantly and take other measures to improve its efficiency, while the other banks should keep the same speed to optimize scale. For the marketing of interest rates, large banks should recapitalize and reduce the dependence on spread income, while the smaller banks should seek other ways other than size. For financial disintermediation severing, the sixteen listed banks should be all required to downsize.Specifically, the biggest four banks should decrease to 90%, the smallest six banks to 92%, and the mediums to 95%. While the financial supervisory institution should open the regulation of deposit ratio, so that it could stabilize the available credit.