An Empirical Analysis On The Efficiency Of Chinese Commercial Banks

Finance is the core of the modern economy. The development of bank industry is related directly to our country's financial stability and safety. The banking efficiency is also related to the effect of social resources allocation and the utility level of financial resources.Since our country joined WTO, our country has cancelled limitation to the foreign banks. The foreign bank is now entering the Chinese market. Our commercial banks face the more fierce competition. Therefore, our commercial banks must improve their competitiveness to face the challenge. The core nature of competitiveness is banking efficiency. Thus it is very important to appraise and compare our country's banking efficiency. The efficiency research is good for setting the financial regulation for the Chinese bank supervision authority and is good for Chinese commercial banks to judge the efficiency level distance from other banks so as to promote their own efficiency level. Consequently, it is very meaningful to do research on banking efficiency.It firstly interprets the basic meaning of the bank efficiency and the approaches applied in the banking efficiency research based on a full review of the related studies. Then, it uses the financial data of 12 native banks to measure the technical efficiency, scale efficiency and cost efficiency in order to reflect the micro-operational efficiency of native commercial banks. Finally, it gives an effective way to improve the Chinese commercial banks'efficiency.For the estimate of technical efficiency which reflects the capability of maximizing the output or minimizing the input, it adopts the input-oriented'super-efficiency'DEA model in order to solve the problem of ranging the relatively effective DMUs more than one. The result indicates that the technical efficiency of the four state-owned banks is much lower than that of shareholding banks. It probably relates to the lack of high-quality talents and stimulant structure of financial innovation. The Industrial and Commercial Bank of China (icbc), the Agricultural Bank of China (abc) and the China Construction Bank (ccb) have the lowest technical efficiency but have improved more or less.For the estimate of the scale efficiency which reflects the variation of average cost due to scale change, it uses the multiple-liner regression model. The result indicates that the scale economy of native commercial banks is not clear. The scale efficiency is between 0.9 and 1.07. The scale efficiency value of four state-owned banks is all above 1, and the banks become more and more scale inefficient. Comparatively, the shareholding banks almost have the scale efficiency but the degree of the scale efficiency is decreasing.For the estimate of cost efficiency which measures the capability of cost control, it introduces the DFA (distribution free approach) to measure it. It finally indicates that the Industrial Bank and the China Merchant Bank have the best cost efficiency, while the Agricultural Bank of China has the lowest cost efficiency. But there isn't much difference between the state-owned banks and shareholding banks. It is related to the action of stripping bad asset off by our government. And it is also related to insufficient samples.The empirical analysis finally gives some effective ways to improve the Chinese commercial banks'efficiency. Such as the optimization of property right structure of state-owned commercial banks, the optimization of asset disposition, accelerating the financial technical innovation, establishing the efficient incentive system and raising the quality of human resource, etc.