The Research On The Financial Efficiency Of Village And Town Banks In China And Its Determinants

In order to further promote the financial reform in rural China,and satisfy the growing demand for financial services of the farmers and medium-sized and small enterprises,the China Banking Regulatory Commission relaxed the entry criteria of the rural financial institutions by the end of 2006,encouraging various types of capital to participate in the construction of rural finance,increasing efforts to support the establishment of village banks.In 2007,the village banks and other new rural financial institutions began a pilot operation in our country.Since the pilot,the village banks have achieved rapid development.But there are still many problems because of the short operational time and the development is still in the primary stage.Just like: difficult to absorb savings,single business variety,low level of service,unsound risk control system,lack of professional personnel,not strong of the government support strength,the unbalanced regional distribution,deviate from the original intention that support the financial services for the agriculture and the poor and so on,all of these produce an effect on the financial efficiency of village banks.In view of this,this paper starts from the actual development of China's village banks,and study on the financial efficiency and its influencing factors from the theoretical and empirical.Based on the existing research literature at home and abroad and analyzing the current situation of the development of village banks in our country,we theoretically analyze the financial efficiency of village banks and the influence factors,then We calculated the sample banks' financial efficiency by using the CCR model of the DEA approach,finally analyzed empirically the micro and macro determinants of those banks' financial efficiency by adopting TOBIT model,drawing on data for 72 village banks in 23 provinces between 2008 and 2013.The research result shows that the financial efficiency of sample banks is relatively low.There is a larger space for development.There is no conflict between social performance and financial efficiency,the dual goals can be considered in the process of development;profitability and ability of asset allocation help to improve the village banks' financial efficiency;sample banks exist economies of scale;the greater the proportion of the main shareholders,the more unfavorable to improve the financial efficiency of village banks.In the macro factors,operating in economically developed areas,village banks' financial performance is worse than that of underdeveloped areas;RMB savings deposits of urban and rural residents and the growth rate of fixed assets investment in the whole society are positively associated with financial efficiency.Finally,according to the empirical results,this paper puts forward some practical suggestions from the two levels of government and institutions,to improve the financial efficiency of village banks,and provide financial services for rural areas in China.