Corporate Governance And Bank Efficiency: Evidence From Chinese Listed Commercial Banks

Commercial bank efficiency is an important embodiment of bank resource configuration. As financial markets developing and the degree of economic competition intensifying, it is very important to research the efficiency of commercial banks which supports the financial system in China. The rise of bank efficiency can not only provide power for economic development directly, but also promote the efficiency of the financial system in China and facilitate the scarce resources to flow orderly, finally realizing reasonable allocation of resources. Bank efficiency is affected by many factors at the same time. As commercial banks get reformed and listed, influence factors in the capital market of the bank efficiency become more complex. Therefore, it is important to explore and analyze corporate governance factors which are of great influence to the listed commercial banks, which is of important strategic significance for listed commercial banks developing under the new normalization, further improving bank efficiency and supporting the sustainable development of the economy.Based on relevant researches on bank efficiency and the actual situation of listed commercial banks in China in recent years, this paper uses the data of 16 Chinese listed commercial banks from 2008 to 2013 as the sample, and uses appropriate econometric model and methods of empirical research to research the cost efficiency and profit efficiency of listed commercial banks in our country. This paper discusses the influence of corporate governance factors on cost efficiency and profit efficiency, and proposes policy recommendations based on the research.The main research results and innovation are as follows:â‘ Based on the review of literature of relevant studies on bank efficiency, this paper theoretically analyzes the relationship between corporate governance and bank efficiency. Hypothesis are put forward from four aspects of ownership structure, board governance, equity and management incentive, which support the follow-up researches.â‘¡This paper compares measurement methods of bank efficiency in existing research literature. Considering the reality in China, this paper determines the calculation method and functional forms of the cost efficiency and the profit efficiency. Based on above analysis, selecting input and output indicators, using CSMAR database, bank annual reports and other related data, the paper studies the cost efficiency and profit efficiency of the banks, analyzing the trend of cost efficiency and profit efficiency, and possible reasons for different bank efficiencies.â‘¢This paper determines each sub-index of the system of corporate governance, using data of listed commercial banks in China from 2008 to 2013 to analyze the impact of corporate governance sub-index on the cost efficiency and profit efficiency. The empirical results show that the largest shareholder ownership has nonlinear relationship with the cost efficiency and the profit efficiency. The largest shareholder ownership has a U-shaped relationship with cost efficiency, and an inverted U-shaped relationship with profit efficiency. Board scale and cost efficiency has an inverted U-shaped relationship. Board scale does not influence the profit efficiency. Management ownership is positively correlated with bank cost efficiency, but negatively correlated with the profit efficiency significantly. Compensations of directors, supervisors and executives have significant negative effects on the cost efficiency and the profit efficiency. In terms of control variables, the non-performing loan ratio has significant negative impacts on the cost efficiency and the profit efficiency. Asset-liability ratio and capital adequacy ratio are negatively correlated to the cost efficiency. Total asset turnover is positively correlated to the cost efficiency and negatively correlated to the profit efficiency significantly. The second to the tenth largest shareholder ownership, whether a bank is state-owned and independent directors proportion have no significant correlation with bank efficiency.â‘£This paper constructs an integrated index to objectively describe the level of corporate governance of listed banks based on the system of corporate governance variables. The paper uses the integrated index to explain the influence of corporate governance on bank efficiency. The empirical results show that the integrated index of corporate governance is positively correlated with the cost efficiency significantly. Namely, the cost efficiency increases as corporate governance of banks improves. However, the integrated index of corporate governance has a significant negative effect on the profit efficiency, which puts forward requirements to improve the structure of corporate governance and perfect the corporate governance mechanism of listed commercial banks in China from the perspective of profit efficiency.