The Empirical Study On The Relationship Of Market Structure, Efficiency And Performance Of China’s Commercial Banks

With the deepening of reform and the increasing of opening-up in China’s banking industry, market share of state-owned commercial banks gradually reduce, and market structure has being changing. At the same time, the entry of foreign banks has brought serious challenges to China’s financial markets, so that commercial banks face with huge pressure in the operation and management. Compared with foreign banks, the profitability of domestic commercial banks is low, and performance is at a low level. In recent years, the relationship between market structure, efficiency and performance of commercial banks has gradually become one of the hot topics of research scholars at home and abroad. Therefore, to study the relationship between performance and market structure, efficiency of commercial banks, and to explore methods to improve performance of commercial banks, which have an important significance to the development of China’s commercial banks and the entire financial industry stability.The paper starts from the point of view of the theory of industrial organization, selects14listed commercial banks in China as the research object, studies the relationship between performance and market structure, efficiency of commercial bank, in order to provide some theoretical basis for the improvement of the level of performance and the reform of China’s banking industry. The main content of the paper consists of four parts.The first part is Theoretical analysis. First, it describes the research background and significance of the paper, and briefly summarizes and comments the current related researches at home and abroad. Second, it discourses the theory of market structure, efficiency and performance of commercial banks, including the concepts and measurement methods of market structure, efficiency, performance of commercial banks.In the second part, it measures efficiency of commercial banks based on data envelopment analysis. First, it elaborates the theory and method of data envelopment analysis. Second, it takes14listed commercial banks in China from2005to mid-2012as the research object, and selects owners’ equity, deposits and operating expenses of commercial banks as input indicators, and loans and net profit as output indicators, measures technical efficiency, pure technical efficiency and scale efficiency of these commercial banks. The efficiency measurement results show that compared with the state-owned commercial banks, technical efficiency and scale efficiency average value of joint-stock commercial banks in China is higher and stable, but pure technical efficiency value is relatively low.In the third part, it empirically analyzes the relationship between market structure, efficiency and performance of the commercial banks in China. First, it starts from the point of view of theory of industrial organization, selects14listed commercial banks in China from2005to mid-2012as the research object, constructs empirical research regression equation. Second, according to the regression equation, it takes return on assets as performance indicator, X efficiency and scale efficiency as efficient variable, Market share and market concentration as market structure variables, the NPL ratio, asset-liability ratio and net interest margin as a control variable, and puts panel data sample into the regression equation. At last, it empirically studies the relationship of commercial banks’ performance and market structure, efficiency by the Hybrid model estimation method, tests whether market power hypothesis and efficient structure hypothesis exist in China’s banking market or not. The empirical results show that there is a significant relationship between market structure, efficiency and performance of China’s commercial banks, market power hypothesis is found in China’s banking market, but efficiency structure hypothesis does not hold in China’s banking market. Specifically, the following three conclusions are listed. First, there is a significant positive correlation between market structure (market share, market concentration) and the level of performance of commercial banks in China. Market structure of the banking industry has a direct impact on the level of performance of commercial banks. Second, efficiency of China’s commercial banks (X-efficiency, scale efficiency) is positively correlated with performance level. It indicates that efficiency is the important determinant to affect performance. And the rise of efficiency of commercial banks will help to improve profitability. Third, it does not exist a correlation between X efficiency and market structure of China’s commercial banks, efficiency of scale is negatively correlated with market share, and not with market concentration.The fourth part is the summary and policy recommendations. It summarizes this paper based on the results of empirical analysis, and made a number of policy recommendations to improve the level of performance of China’s commercial banks, hope to be able to provide some reform in accordance with the managers of commercial banks.