The Analysis Of Operating Efficiency Of Agricultural Bank Of China Zhuhai Branch By DEA

A vast literature addresses the causes of inefficiency in financial services, particularly in banking. The goal of many of these studies is to ascertain whether scale or scope economies exist in banking. In addition to these traditional economic explanations of performance differences among firms, recent studies have focused on the notion of operating efficiency, a measure of the performance of an organization relative to the best practice in that industry. More precisely, operating efficiency describes all technical and allocative efficiencies of individual firms that are not scale/scope dependent.However, the traditional theory of commercial banking holds the assertion that the commercial banks are the typical monopoly industry which means scale of scope economies can lower the operating costs while getting more profits. For that reason, in reality commercial banks intend to enlarge their scale and scope and build the enterprises'culture of marketing. And this culture has been developed so deeply in different operating levels of commercial banks. The issues of the Agricultural Bank of China Zhuhai Branch within this paper are just a reflection of this culture.A vast literature shows that only ten percent of cost difference is caused by scale or scope economies. The main cause is the operating efficiency. This paper is inclined to search for the better operating methods to produce a better result.About the research of efficiency of the bank, domestic relevant documents are mostly preferred to use some routine single key element indexes. Though these indexes can reflect roughly the bank manage efficiency, for the further research of bank efficiency, they can only offer limited information. And it's difficult to reflect the improvement of the efficiency of the bank by these indexes.This paper uses DEA methodology to measure operating efficiency in commercial banking of the Agricultural Bank of China Zhuhai Branch. DEA methodology, first introduced by Charnes, Cooper and Rhodes (1978), has been used to measure the empirically derived relative efficiency (e.g. technical efficiency) of non-profit-making organizations, where profit measure are difficult to calculate (particularly in the public sector) (Sueyoshi, 1991). Moreover, DEA can measure the relative efficiency of a group of organizations in their use of multiple inputs to produce multiple outputs, in which the efficient production function is not known or easily specified.Based on the model C2 R and C 2GS2 of the Data Envelopment Analysis, combined with characteristics of inputs and outputs of the Agricultural bank of China Zhuhai Branch, the paper sets up an index system of inputs and outputs as well as an technical efficiency evaluation model for Zhuhai Branch, which considers not only the profit ability, but also the scale. The technical efficiency value, pure technology efficiency value and scale efficiency value of sub-branches are given respectively based on the samples of 12 sub-branches of Zhuhai Branch. The input redundancy of labor and output deficiency of profit, operating income, deposits, international business, are also calculated. The pertinent operating suggestions of efficiency improvement of banks are put forward.The results show that:â'ˆThe differences of technical efficiency between these sub-branches came from the differences of pure technology efficiency rather than the scale efficiency.â'‰The main causes of deficiency are as follows:â‘ Inflation of staff for management.â‘¡Deficiency in operating.The pertinent operating suggestions of efficiency improvement of banks are put forward as follows:â'ˆDecrease the scale of management departments while increase the span of control.â'‰Reform the marketing system. The manager of the sub-branch should take the whole responsibility of marketing.â'ŠEliminate the internal managing departments in Xiangzhou and Doumen sub-branch.â'‹Reform the organizational structure. Assemble the international business, loan business and the accounting business to the professional department in the branch.â'ŒIntroduce sophisticated devices to take place the employees.The contributions and characteristics of the paper are:â'ˆIntroducing the wide used model DEA in the micro-level of the commercial bank, and calculating the efficiencies i.e. cost efficiency, technical efficiency and allocative efficiency by excel.â'‰Studying for the benefit of the actual manager instead of the observer.â'ŠThe inefficiency reasons of banks are list out by quantity analysis, and the pertinent macro strategies and concrete measures on improving banks efficiency are given, which is another improving strategy from quantities analysis.Because of the limitation of the data, some quantity analysis for technical equipments and others cannot be fulfilled which should be further studied in the future.