An Empirical Study On Efficiency Change Of Chinese Commercial Banks Based-on SFA

Along with the gradual marketization of interest rates, research on commercialbanks’ efficiency became a hot topic once again. On the basis of scholars’ researchresults, this paper investigates the efficiency change of16commercial banks during8years (2005-2012) with further research on the theory of efficiency measure.This paper started from general definition of efficiency, introduced the definitionof commercial bank’ efficiency, classified the efficiency of commercial banks, andthen expounded parametric method and nonparametric method systematically. Withthe comparison of Stochastic Frontier Approach and Data Envelopment Analysiswhich was used frequently, this paper carried on the former in the empirical analysis.This paper introduced the Total Factor Productivity based on general Malmqusitindex, and analyzed the changes in the efficiency of commercial banks during theinspection period. This method effectively solved no-upper-limit scale efficiencyoccurred with index decomposition, which was derived on distance function usingDiewert’ s two identical auxiliary theorem.This paper used Battese&Coelli (1995) model to measure commercial banks’efficiency during the inspection period in the empirical analysis. Commercial banks’efficiency showed a rising trend before the economic crisis which happened in2008,and dropped after that. The situation improved after2010, but declined again in2012.The result of the study showed that the efficiency of joint-stock commercial banks isfar higher than that of state-owned banks. Branch number, ownership property andnon-performing loan ratio were significant statistically.On the basis of parameter estimation, this paper assessed changes of commercialbanks’ total factor productivity which is decomposed into technical progress, simpletechnological efficiency and scale efficiency. According to the results, technologyprogress was the leading force to promote the efficiency before economic crisis. Aftereconomic crisis, to make full use of existing technology is the main power ofimprovement. Scale expansion will not improve efficiency, especially for city banks.