Research On Economic Efficiency Of City Commercial Bank Based On Stochastic Frontier Analysis Method

Currently, the banking industry is not only the core industry of China’s financial system, but also related to our country’s economic lifeli ne, its development will play a very important role not only on the banking sector and even on the integration and utilization of the entire financial industry resources. With the continuous reform of China’s banking industry, China’s four big state-owned banks dominated the pattern has been broken, instead is newly established joint-stock commercial banks, foreign banks, private banks and many city commercial banks to jointly participate in the market competition situation. Among them, the development of city commercial bank is the most rapid. However, the strength of city commercial banks is very limited, so how to improve their competitiveness is an urgent problem in the increasingly fierce financial environment. If the city commercial banks want to be in an invincible position in the cruel competition, its primary task is to improve their economic efficiency. From the perspective of economics, it is necessary to let the bank obtain larger in return when output is established through certain channels, or invest least resources if revenue is established. Therefore, study on the economic efficiency of city commercial bank is particularly necessary.From the angle of economics, this paper gives full consideration to the bank’s costs and profits, calculates and analyzes the economic efficiency(namely cost efficiency and profit efficiency) of China’s city commercial banks using the stochastic frontier analysis method(SFA) of parametric method. First, this article rounds up the frontier efficiency of commercial banks from two dimensions of home or abroad, parameter or non-parameter, then introduces the connotation of bank efficiency and calculation method, and selects stochastic frontier analysis(SFA) method as the research method through the analysis of the advantages and disadvantages of different calculation methods. Secondly, on the basis of the detailed discussion of stochastic frontier analysis method theory and a variety of different models, selectes the Battese and Coelli(1992) model, regards Cobb Douglas cost function(Cobu-Dauglas, C-D) as the basic function and constructs the final cost efficiency boundary function and profit efficiency boundary function model by embedding risk factors. Finally, taking into account the characteristics of the stochastic frontier model and the possibility of obtaining the sample index, selects input and output indicators by combining the intermediary method and the assets approach, and takes the panel data of 18 city commercial bank in nearly five years as samples for e mpirical research. It is obvious that the impact of risk factor on the efficiency of urban commercial banks is obvious, and the risk factor can reflect the economic efficiency of city commercial bank more truly. We also find that the cost efficiency and profit efficiency of each city commercial bank are declining, which reflects the ability of its cost control and the ability to decrease. City commercial banks listed or not, the asset size does not directly determine their level of efficiency. Therefore, we should improve the economic efficiency of urban commercial banks from the aspects of strong risk supervision, avoid blind scale expansion and so on.