The Study Of Commercial Bank's Efficiency Of China Based On SFA

Chinese banks are facing competition from their foreign rivals as China implements the deregulation of foreign entry under WTO. Managerial efficiency for Chinese banks has been the key factor to win in the competition. In order to improve our domestic banking efficiency, the level of banking efficiency and the degree of risks should be estimated and evaluated in a comprehensive way. So we the efficiency of our domestic banks is measured and tested in the paper using SFA models and methods from different aspects. Through the theory analysis and empirical results contrasts, the paper will be able to assist policy makers and managers of Chinese banks to carry on suitable policies and strategies so that we can achieve the goal of improving the overall domestic banking efficiency.After the review of some related researches on foreign or native banking, this paper interprets the basic meaning of the bank efficiency and the approaches applied in the researches: stochastic frontier approach, which is employed in this paper to estimate the efficiency in Chinese banking.The method of Stochastic Frontier Analysis (SFA) on measuring the efficiency level of commercial banks, it needs to limited the forefront of the efficiency of the banking function for a specific, and estimating the parameters of function by using banks samples. In this paper, the total cost of commercial banks selected as the dependent variable, the price of inputs and outputs as variable, then logging the dependent variable and variable. In general, the effective loan, business income are specified as outputs, The Effective loans instead of the traditional indicators of loans can evaluate the efficiency of commercial banks more reasonable, in considering the bank's traditional business loans at the same time, take into account the emerging business of commercial banks on behalf of the non-interest income situation. This kind of income can be reflected in the introduction of modern commercial banks growing importance of non-traditional business characteristics. It is provide a guarantee of efficiency for fair comparison of state-owned commercial banks and joint-stock commercial banks . the cost of labor, the cost of Physical capital and the cost of credit as inputs. The estimation result shows that the efficiency of the whole banking increases gradually at the same time. The efficiency of state-owned banks is lower than that of shareholder-owned banks, but the Gap is shrinking gradually. The research on the influencing factors is conducted in regression model, while the SFA efficiency estimates are referred as dependent variable. The result told us that the rate of nonperforming loans, the structure of property rights, the quality of human resources has significantly affect the efficiency of commercial banks. The bank size, the capital adequacy ratio, the proportion of intermediate business income has effect the efficiency of commercial banks limited.Based on the above results, some suggestions are made in this paper. Raise the capital adequacy ratio of Commercial banks, optimize the structure of property rights, enhance the quality of bank capital s compress the size of state-owned commercial banks , speed up the development of joint-stock banks, improve the quality of human resources, accelerate the pace of development of intermediary business, strengthening intermediary business innovation.