Study On The Evolution And Influence Factors Of Commercial Bank Efficiency

Economic development depends on financial support, while economic prosperity is the cornerstone of financial development. Commercial bank is the main body in a financial system, so the commercial bank’s efficiency reflects the efficiency of capital utilization. Commercial bank’s efficiency not only reflects the relationship between input and output of commercial banks, but also reflects its technical efficiency and the capability of resources allocation. This paper mainly studies on the evolution of commercial bank’s efficiency, which includes the scale efficiency, scope efficiency and frontier efficiency of the commercial bank etc. According to the presence or absence of production functions, the measuring models of the commercial bank’s efficiency evolution can be divided into non-parametric model and parametric model.This paper compares the advantages and disadvantages of non-parametric model and the parametric model, and then selects the SFA model as the measuring model,which belongs to the parametric model. In the measuring indicator system, we select the interest income and non-interest income as the output indicator while the fund price, producer price and median price are selected as the input indicator. In addition,this indicator system also adopts four potential influence factors as the parameters,including non-performing loan ratio, loan-to-deposit ratio, the total size of asset and asset stability. In this paper, we measures the evolution of 14 national joint-stock commercial banks’ efficiency in China from 1996 to 2014 from the perspective of profit efficiency and cost efficiency, which finds that the cost efficiency of commercial banks is generally close to the effective level(above 0.950) except some state-owned commercial banks and the profit efficiency evolution trend of non-state-owned banks and state-owned banks are different. The profit efficiency of state-owned banks is low in the early period and improved greatly because of bad assets stripping since 2003 while that of non-state-owned banks is high all the time.Among the state-owned banks, the profit efficiency of the Agricultural Bank of China is low while the efficiency of Bank of China and China Construction Bank are high and steady, the Industrial and Commercial Bank of China and Bank of Communications’ efficiency change greatly. Among the non-state-owned banks,Shanghai Pudong Development Bank, China Merchants Bank, Industrial Bank and China CITIC Bank’ profit efficiency are high and steady while the profit efficiency ofother five non-state-owned commercial banks are low and change greatly.In order to study the influencing factors of commercial bank efficiency evolution, this paper analyzes the specific circumstance of the evolution, which finds that the cost efficiency of commercial banks is generally close to the effective level,so we don’t need further study the influencing factors. Therefore, we can measure and analyze the influence of business environment and governance structure on the profit efficiency only from the perspective of profit efficiency evolution. The business environment of commercial banks’ impact on the profit efficiency reflects that GDP growth will promote profit efficiency and the high consumer price index will reduce it while the M2 growth rate’s influence on it is not significant. Meanwhile, the governance structure’s influence on the profit efficiency reflects that non-performing loan ratio, loan-to-deposit ratio, the total size of asset will reduce the profit efficiency while asset stability and non-interest income ratio will improve it.From this paper that studies on commercial bank’s efficiency evolution and its influencing factors, we demonstrate five suggestions to improve the commercial banks efficiency. First, because the cost efficiency is invariant, commercial bank should control costs and expenses, improve the use of self-service terminal equipment and weaken the dependency on labor cost. Second, in order to eliminate the influence of non-performing loans, commercial bank should focus on long-term risk control,pay attention to identify the types of customers and provide quality services to improve the profit efficiency. Third, because the scale expansion does not directly affect the profit efficiency, commercial bank should not excessively pursue the expansion speed but pay attention to ensure the quality of assets, especially the quality of customer in the expansion of the scale of assets. Fourth, commercial bank should improve the investment and usage efficiency of advanced equipment, reduce labor costs, effectively allocate the human resources and provide more intermediary business to improve bank’s efficiency. Fifth, the commercial bank should have the risk awareness, improve risk management and seek for high-quality customers and create new products to meet the needs in new era during the plateau of economic development.