An Empirical Study On Chinese Commercial Banks’ Operating Efficiency

Banking is the core of the financial industry, the development of modernfinancial industry is closely linked with the development of the national economy.Commercial banks play an irreplaceable role in China’s social financing system. Onthe domestic front, with the reform of China’s financial system, the banking systemstructure has undergone a major change, there has been a number of smalljoint-stock commercial banks, many of the original folk "underground" creditorganizations gradually integrate into the formal financial system; in Internationally,with the gradual opening up of the domestic banking, foreign banks entered China’smarket, and gradually increase the scope of business; With the accelerated pace offinancial globalization, China’s banking industry is increasingly vulnerable to theimpact of the global financial crisis. Therefore, China’s banking industry is facingincreasingly fierce competition in the domestic and international pressure.Profit is the goal of the banks, we must continue to improve our efficiency tosurvive in the fierce competition. Therefore, the study of the operating efficiency ofthe commercial banks in China is not only necessary, but also feasible. This paperuses super-efficiency DEA model and selects20commercial banks in China,Estimated their operating efficiency between2006and2011. This article was a totalof four parts.The first chapter of the research shows the background of the study andsignificance of the topic; Based on the angle of the method, summarizes the researchof scholars in the operating efficiency of commercial banks, and pointed out thearticle innovation and inadequacies. The second chapter is the empirical study of the operating efficiency of Chinesecommercial banks using the super-efficiency DEA model. This chapter describes thebasic form of super-efficiency DEA model; We define two sets of input/outputcombination, In Model1, we define the total deposits, fixed assets and number ofemployees as factor inputs, loans and pre-tax profit as output elements; Model2increased balance-sheet items as a output elements to measure the its impact of thebank efficiency. According to the empirical results: first, the efficiency value of thethree types of commercial banks in China in descending order: city commercialbanks, national joint-stock commercial banks and large commercial banks. Second,the model estimates the efficiency of Model2is slightly higher than the efficiency ofModel1,This shows that the balance-sheet items enhance the efficiency of China’scommercial banks, but not significantly. Third, we use malmquist productivity indexmethod. The results show that: In the period2006-2011, China’s commercial banks’malmquist productivity index is increasing， its decomposition efficiency areimproved, too. However, affected by the subprime mortgage crisis, the total factorproductivity of China’s commercial banks declined in2008.In the third chapter, we establish a multiple linear regression model based onPanel Data Model, to examine the factors influencing the efficiency of Chinesecommercial banks. We selected the super efficiency of model1as the dependentvariable, GDP growth rate and the deposit and lending spreads are defined as theindependent variables of the macro-level. Return on assets, loan-to-deposit ratio andNPL ratio are defined as the independent variables of the micro-level. The empiricalresults show that: three micro-level independent variables significantly affect theefficiency. Return on assets, loan-to-deposit ratio and loan-to-deposit spreadspositively correlate with the efficiency value, GDP growth rate and NPL rationegatively correlate with the efficiency value.In the fourth chapter, we combine above empirical findings and characteristics of various commercial banks in China, put forward suggestions to improve theoperating efficiency of Chinese commercial banks. We should take differentmeasures, such as adjusting the operation and management mode, Strengtheningefforts to manage non-performing assets, increasing investment in informationtechnology, intensifying product innovation and so on, to improve the efficiency ofChina’s commercial banking.In the face of new opportunities and challenges in the post-crisis era, combiningwith the empirical results of this paper and the commercial banks’ operating status,we should strengthen risk control, at the same time, take a variety of measures toimprove the comprehensive strength of China’s commercial banks, in order to copewith the increasingly fierce competition in the domestic and international pressure,to achieve the sustained and healthy development of China’s commercial bankingsector.